WORLD
ENERGY SOLUTIONS, INC.
___________
ANNUAL
MEETING OF STOCKHOLDERS
May 22,
2008
PROXY
STATEMENT
___________
INFORMATION
CONCERNING SOLICITATION AND VOTING
This proxy statement is furnished in
connection with the solicitation of proxies by the Board of Directors of World
Energy Solutions, Inc. for use at our 2008 Annual Meeting of Stockholders to be
held on Thursday, May 22, 2008 at 10:00 a.m., local time, at The
Hilton Garden Inn, 35 Major Taylor Boulevard, Worcester, Massachusetts 01608 and
at any adjournment or postponement of the Annual Meeting.
We are mailing this proxy statement and
the enclosed proxy on or about April 25, 2008 to our stockholders of record as
of April 2, 2008. We are also mailing our Annual Report for the fiscal year
ended December 31, 2007 to such stockholders concurrently with this proxy
statement. We will furnish, upon written request of any stockholder
and the payment of an appropriate processing fee, copies of the exhibits to our
Annual Report on Form 10-K for the fiscal year ended December 31,
2007. Please address all such requests to James Parslow, Secretary,
World Energy Solutions, Inc., 446 Main Street, Worcester,
MA 01608.
Only stockholders of record at the
close of business on April 2, 2008 are entitled to receive notice of and to vote
at the Annual Meeting. Each share of our common stock, par value $0.0001 per
share, outstanding on the record date is entitled to one vote. As of the close
of business on April 2, 2008, there were outstanding and entitled to vote
84,648,734 shares of common stock including 1,953,500 shares of outstanding
restricted stock that are not vested.
If your shares are held in "street
name" by a bank or brokerage firm, your bank or brokerage firm, as the record
holder of your shares, is required to vote your shares according to your
instructions. In order to vote your shares, you will need to follow
the directions your bank or brokerage firm provides you. Many banks
and brokerage firms also offer the option of voting over the Internet or by
telephone, instructions for which would be provided by your bank or brokerage
firm on your voting instruction form.
The presence, in person or by proxy, of
outstanding shares of common stock representing one-third of the total votes
entitled to be cast is necessary to constitute a quorum for the transaction of
business at our Annual Meeting. Shares that reflect abstentions will
be counted for purposes of determining whether a quorum is present for the
transaction of business at the Annual Meeting.
The two nominees for director receiving
the highest number of votes “FOR” election will be elected as
directors. This is called a plurality. You may vote for
all of the director nominees, withhold your vote from all of the director
nominees or withhold your vote from any one or more of the director
nominees. Votes that are withheld and broker non-votes will not be
included in the vote tally for the election of directors and will have no effect
on the results of the vote.
Amending our 2006 Stock Incentive Plan
and ratifying the selection of UHY LLP as our independent registered public
accounting firm for 2008 each require the affirmative vote of a majority of all
the votes present or represented at the Annual Meeting and voting on the given
proposal. Authorizing an amendment to our Certificate of
Incorporation requires the affirmative vote of the holders of a majority of the
outstanding shares of our common stock. If you abstain on a
given proposal, your shares will be counted for the establishment of a quorum
but will not be voted on such proposal. Further, broker non-votes
will be included in the determination of the presence of a quorum, but will not
be counted for purposes of determining whether a given proposal has been
approved. As a result, abstentions and broker non-votes will not
affect the results of a vote on the proposed amendment to our 2006 Stock
Incentive Plan or the ratification of the selection of UHY LLP as our
independent registered public accounting firm for 2008. However,
abstentions and broker non-votes will have the effect of a vote “AGAINST” the
proposed amendment to our Certificate of Incorporation. None of the
matters described above to be acted upon at our Annual Meeting will result in
rights of appraisal by stockholders or similar dissenters’ rights.
Shares represented by duly executed
proxies received by us and not revoked will be voted at the Annual Meeting in
accordance
with the
instructions contained therein. If no instructions are given,
properly executed proxies will be voted “FOR” the election of each of the
nominees named herein for director, “FOR” the amendment to our 2006 Stock
Incentive Plan, “FOR” the authorization of the Board of Directors of the Company
to amend our Certificate of Incorporation to effect a reverse stock-split and a
proportionate reduction in the number of shares of our authorized common stock
as described herein, and “FOR” the ratification of the selection of UHY LLP as
our independent registered public accounting firm for the current fiscal
year.
You may revoke your proxy at any time
before it is voted on any matter by (1) giving written notice of such
revocation to the Secretary of the Company at the address set forth below, (2)
signing and duly delivering a proxy bearing a later date, or (3) attending
our Annual Meeting and voting in person. Your attendance at our Annual Meeting
will not, by itself, revoke your previously submitted proxy. If you
are not a record holder of your shares, you may only revoke your proxy in
accordance with the instructions provided to you by your bank or brokerage
firm.
We will bear the expenses of preparing,
printing and assembling the materials used in the solicitation of proxies. In
addition to the solicitation of proxies by use of the mail, we may also use the
services of some of our officers and employees (who will receive no compensation
for such services in addition to their regular salaries) to solicit proxies
personally and by telephone and email. Brokerage houses, nominees, fiduciaries
and other custodians will be requested to forward solicitation materials to the
beneficial owners of shares held of record by them and we will reimburse them
for their reasonable expenses.
Our management does not know of any
business other than the matters set forth in the Notice of Annual Meeting of
Stockholders and described above that will be presented for consideration at the
Annual Meeting. If any other business should properly come before the Annual
Meeting, the persons named as proxies will vote the proxies, insofar as the same
are not limited to the contrary, in regard to such other matters, as seems to
them to be in the best interest of the Company and its stockholders. Each of the
persons appointed by the enclosed form of proxy present and acting at the
meeting, in person or by substitute, may exercise all of the powers and
authority of the proxies in accordance with their judgment.
Our principal executive offices are
located at 446 Main Street, Worcester, Massachusetts 01608.
PROPOSAL
1
ELECTION
OF DIRECTORS
Our Board is divided into three
classes. Following this annual meeting we expect there will be two
Directors in Class I, two Directors in Class II and one Director in Class
III. Directors serve for three-year terms with one class of Director
being elected by the Company’s stockholders at each Annual Meeting.
At the recommendation of the Corporate
Governance and Nominating Committee, the Board of Directors has nominated Dr.
Edward Libbey and Mr. John Wellard for re-election. Dr. Libbey is
currently the chairman of the Board of Directors. Unless otherwise
specified in the proxy, it is the intention of the persons named in the proxy to
vote the shares represented by each properly executed proxy for the re-election
of Dr. Libbey and Mr. Wellard as Directors. If elected, each nominee will serve
until our 2011 Annual Meeting of Stockholders and until such director's
successor has been duly elected and qualified. Management does not contemplate
that any of the nominees will be unable to serve, but in that event, proxies
solicited hereby may be voted for a substitute nominee designated by our Board
or our Board may choose to reduce the number of directors serving on the
Board.
Our Board of Directors recommends that
stockholders vote “FOR” the election of each nominee as a director of World
Energy Solutions, Inc.
INFORMATION
AS TO DIRECTORS
Set forth below is the name and age of
each member of our Board of Directors, including each nominee for director, his
principal occupation for at least the past five years, the year each became a
member of our Board of Directors and certain other information. The information
is as of February 29, 2008.
|
Name
|
Age
|
Present Principal Employment and Prior Business
Experience
|
Director Since
|
| |
|
Class
II Directors: Term expires at 2008 Annual Meeting of Stockholders;
Nominees for Re-election
|
|
Edward
Libbey
|
61
|
From
October 2006 to present, Dr. Libbey has been the owner and principal of
Edward Libbey Consultants Limited, an energy and recruitment consulting
firm. Prior to that, Dr. Libbey worked with KMC International
(which is held by KMC Holdings, a human resources recruitment company)
where he had been a consultant from April 2003 to July 2006, and prior
thereto was a consultant with Preng & Associates from May 1999 to
April 2003. Dr. Libbey also worked at British Petroleum for over
20 years in supply, logistics and oil trading. Dr. Libbey
is currently the chairman of our Board of Directors.
|
1999
|
|
John
Wellard
|
61
|
From
March 1996 to April 2005, Mr. Wellard was employed with Union Gas
Limited in various capacities, including as its President from May 2003 to
December 2004. He also served Union Gas Limited at various times as a
Senior Vice-President of Sales and Marketing & Business
Development, Vice-President of Sales and Marketing, Senior Vice President
of Asset Management and Vice President of Operations.
|
2006
|
|
Class
III Director: Term expires at 2009 Annual Meeting of
Stockholders
|
|
Richard
Domaleski
|
38
|
Mr. Domaleski
has served as our Chief Executive Officer since 1999 and as our President
from 1999 to 2007. Mr. Domaleski is responsible for our strategic
vision and sales execution. In 1996, Mr. Domaleski co-founded our
predecessor business, Oceanside Energy, Inc., which was one of the first
reverse auction businesses to take advantage of utility deregulation and
one of the first aggregators to be granted a FERC tariff, and which became
our wholly-owned subsidiary in 2000. Mr. Domaleski is the nephew of Mr.
Wolfe.
|
1999
|
|
Class
I Directors: Term expires at 2010 Annual Meeting of
Stockholders
|
|
Thad
Wolfe
|
65
|
Since
February 2007, Mr. Wolfe has been President, Government / Air Force with
the Thomas Group Inc., a professional services firm specializing in
cultural change, process and strategic consulting. From 1999 to
February 2007, Mr. Wolfe had been employed with SAIC in various
capacities, most recently as Senior Vice President and Corporate Account
Manager for the North American Aerospace Defense Command (NORAD) and
United States Northern Command (USNORTHCOM). Mr. Wolfe is the uncle of Mr.
Domaleski.
|
2007
|
| |
|
|
|
|
Patrick
Bischoff
|
39
|
Since
the fall of 2007 to the present, Mr. Bischoff has been the Managing
Director and founder of Luminor Ventures, Inc., a consulting and angel
investment firm. Since April 2001 to the present,
Mr. Bischoff has been the Managing Director and founder of Spinnaker
Ventures LLC, an investment company owned by a trust for the benefit of
Mr. Bischoff’s children, which makes venture capital investments.
Mr. Bischoff served as Managing Director, Electronic Products, for
Crocodiles not Waterlillies LLC, a children’s media and entertainment
company from August 2004 until December 2005 and currently is a member of
the advisory board. From August 2002 to April 2003, he was a senior
partner of Esotera Group Inc., a human capital consulting and research
company. In April 1997, Mr. Bischoff co-founded Saba Software Inc.
and held various positions with the company until September
2001.
|
2004
|
DIRECTOR
COMPENSATION
In 2007, members of our Board of
Directors who were employees of World Energy or who were stockholders of the
Company at the time of our initial public offering on November 16, 2006 received
no compensation for their service as directors. In 2007, each of our
non-employee directors who were not stockholders of the Company at the time of
our initial public offering were compensated for their service as directors as
follows:
| |
|
2007
($)
|
|
Annual
retainer
|
|
10,000
|
|
Regularly
scheduled Board meetings attended in person
|
|
1,500
|
|
Regularly
scheduled committee meetings attended in person
|
|
1,500
|
In 2008,
each of our non-employee directors will be compensated for their service as
directors as follows:
| |
|
2008
($)
|
|
Annual
retainer
|
|
15,000
|
|
Regularly
scheduled Board meetings attended in person
|
|
1,500
|
|
Regularly
scheduled committee meetings attended in person
|
|
1,500
|
Directors
do not receive any additional compensation for participation in meetings held by
telephone conference call. We reimburse non-employee directors for
reasonable out-of-pocket expenses incurred in connection with attending Board
and committee meetings and for fees and reasonable out-of-pocket expenses for
their attendance at director education seminars and programs they attend at the
request of the Board.
The
following table contains information on compensation earned by the non-employee
members of our Board of Directors during the fiscal year ended December 31,
2007.
2007 DIRECTOR
COMPENSATION
|
Name(1)
|
Fees
Earned or
Paid
in
Cash
($)
|
Stock
Awards
($)(2)
|
Option
Awards ($)(3)
|
All
Other
Compensation
($)
|
Total
($)
|
|
John
Wellard
|
19,000
|
---
|
---
|
---
|
19,000
|
|
Edward
Libbey
|
---
|
---
|
---
|
---
|
---
|
|
Patrick
Bischoff (4)
|
---
|
---
|
---
|
209,000
|
209,000
|
|
Nicholas
Zaldastani
|
---
|
---
|
---
|
---
|
---
|
|
Thad
Wolfe
|
10,500
|
---
|
---
|
---
|
10,500
|
|
(1)
|
Richard
Domaleski, one of our directors, is also our Chief Executive Officer and a
named executive officer. Mr. Domaleski does not receive any additional
compensation as a director. See “Summary Compensation Table” below for
disclosure relating to his compensation.
|
|
(2)
|
There
were no restricted stock awards granted to directors in 2007, and, with
respect to stock awards, no dollar amounts
were
|
|
|
recognized
for financial statement reporting purposes for the year ended December 31,
2007 in accordance with Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123 (revised 2004) Share-Based Payments,
or FAS 123R.
|
|
(3)
|
There
were no stock options granted to our non-employee directors during 2007,
and with respect to stock options, no dollar amounts were recognized for
financial statement reporting purposes under FAS 123R for the year ended
December 31, 2007. The following table shows the aggregate number of stock
options held by each of our non-employee directors as of December 31,
2007. All of the stock options were fully vested prior to 2007.
|
|
Name
|
|
Stock
Options (#)
|
|
Edward
Libbey
|
|
300,000
|
|
(4)
|
The
amount indicated for Mr. Bischoff under All Other Compensation consisted
of consulting fees. In January 2007, we entered into a revised Consulting
Agreement with Mr. Bischoff, which provided that Mr. Bischoff would
provide certain services related to strategic planning and receive certain
compensation for those services through April 1, 2007. This agreement was
amended to extend these services through December 31, 2007.
|
CORPORATE
GOVERNANCE
Our
Commitment to Good Corporate Governance
Role
of Our Board of Directors
Our Board
monitors overall corporate performance and the integrity of our financial
controls and legal compliance procedures. It elects our chief executive officer
who serves at the discretion of the Board. The Board may appoint
other executive officers from time to time as it deems
appropriate. There are no family relationships among any of our
directors or officers except as noted above.
Members of our Board keep informed
about our business through discussions with our chief executive officer and
other members of our senior management team, by reviewing materials provided to
them on a regular basis and in preparation for Board and committee meetings, by
participating in meetings of the Board and its committees, and by making other
inquiries as they consider appropriate from time to time. In addition, we hold
periodic strategy sessions between members of senior management and the Board,
during which members of the senior management team provide in-depth reviews of
various aspects of our business operations and discuss our strategy with respect
to such operations.
Our Board
met nine times during 2007. During 2007, each director attended at
least 75% of the total number of meetings of the Board and all committees of the
Board on which the director served.
Performance
of Our Board
Business
Ethics and Compliance
We have
adopted a Code of Business Conduct and Ethics applicable to all officers,
employees and Board members. The Code of Business Conduct and Ethics is posted
in the “Investor Relations” section of our website at www.worldenergy.com, and a print copy
will be
made available free of charge on written request to James Parslow, Secretary,
World Energy Solutions, Inc., 446 Main Street, Worcester, MA 01608. Any
amendments to, or waivers of, the Code of Business Conduct and Ethics which
apply to our Chief Executive Officer, Chief Financial Officer or any person
performing similar functions will be disclosed on our website promptly following
the date of such amendment or waiver.
Independence
of Non-Employee Directors
Pursuant
to Canadian securities laws, Canadian reporting issuers are required to have a
majority of independent directors. The Canadian securities laws
generally provide that a director will not be independent unless such director
has no material relationship with us (either directly or as a partner,
shareholder or officer of an organization that has a relationship with
us). In addition, a director is not independent if (1) the
director is, or has been within the last three years, employed by us, is, or an
immediate family member is, or has been within the last three years, one of our
executive officers, (2) the director, or a member of the director’s
immediate family who is employed as an executive officer has received
during any twelve-month period within the last three years more than C$75,000
(approx. US$75,000) in direct compensation from us other than director and
committee fees and pension or other deferred compensation, (3) the director or
an immediate family member is a current partner of a firm that is our internal
or external auditor, the director is a current employee of such a firm, the
director has an immediate family member who is a current employee of such a firm
and who participates in the firm’s audit, assurance or tax compliance practice,
or the director or an immediate family member was within the last three years a
partner or employee of such a firm and personally worked on our audit within
that time, (4) the director or a member of the director’s immediate family is,
or has been within the last three years, employed as an executive officer
of another company where one of our executive officers at the same time serves
or served on the compensation committee of such company. In addition,
SEC rules require that a majority of our Board be independent as defined under
the rules of a United States national securities
exchange. Accordingly, our Board has determined that a majority of
its members are “independent” as that term is defined under the applicable
NASDAQ rules.
Our Board
has reviewed all relationships between World Energy and each non-employee
director to determine compliance with the Canadian and United States securities
laws described above and to evaluate whether there are any other facts or
circumstances that might impair a director’s independence. As part of
its review of Mr. Bischoff’s independence, the Board considered the consulting
arrangement between World Energy and Mr. Bischoff and determined it constituted
a material relationship that could affect Mr. Bischoff’s
independence. Based on its review, the Board determined that Dr.
Libbey, Mr. Wellard and Mr. Wolfe are independent directors.
Communications
with the Board
Our Board welcomes the submission of
any comments or concerns from stockholders and any interested
parties. Communications should be in writing and addressed to James
Parslow, Secretary, World Energy Solutions, Inc., 446 Main Street, Worcester, MA
01608 and marked to the attention of the Board or any of its committees,
individual directors or non-management directors as a group. All correspondence
will be forwarded to the intended recipient(s).
Annual
Meeting Attendance
Directors are encouraged to attend our
annual meetings of stockholders.
Our Board
currently has three standing committees: the Audit Committee, the Compensation
Committee and the Corporate Governance and Nominating Committee. Each committee
is composed solely of directors determined by the Board to be independent under
the applicable rules of the SEC and Canadian securities laws, including, in the
case of all members of the Audit Committee, the independence requirements
contemplated by Rule 10A-3 under the Exchange Act. The Board has
adopted a written charter for each standing committee. You may find
copies of the charters of the Audit Committee, the Compensation Committee and
the Corporate Governance and
Nominating Committee in the “Investor Relations” section of our website at www.worldenergy.com,
and print copies will be made available free of charge on written request to
James Parslow, Secretary, World Energy Solutions, Inc., 446 Main Street,
Worcester, MA 01608. The Board also may appoint from time to time ad hoc
committees to address specific matters.
Audit
Committee. The members of our Audit Committee are
Messrs. Libbey, Wellard and Wolfe all of whom are independent. Dr.
Libbey is our audit committee financial expert. The Audit Committee is
responsible for assisting the Board in fulfilling its responsibilities for
oversight of our accounting and financial reporting processes and audits of our
financial statements. The Audit Committee will, among other things,
independently monitor our financial reporting process and internal control
systems, review our financial statements to ensure their quality, integrity and
compliance with accounting standards, ensure the adequacy of procedures related
to such review and oversee the work of our external auditors.
Compensation
Committee. The members of our Compensation
Committee are Messrs. Libbey, Wellard and Wolfe. The
Compensation Committee is responsible for overseeing the discharge of the
Board’s responsibilities related to compensation of our directors, executive
officers and senior management. The Compensation Committee will, among other
things, review the adequacy of compensation, review and approve corporate goals
and objectives relevant to compensation and make recommendations regarding
compensation of the Chief Executive Officer and our other directors and
officers. The Compensation Committee will assess all aspects of compensation
including salaries, bonuses, long-term incentive compensation and other
performance based incentives, taking into account industry comparables to ensure
that compensation is fair and reasonable.
The
Compensation Committee has implemented an annual performance review program for
our executives, under which annual performance goals are determined and set
forth in writing at the beginning of each calendar year for the Company as a
whole, each corporate department and each executive. Annual corporate
goals are proposed by management and considered for approval by the Board of
Directors at the end of each calendar year for the following
year. Annual department and individual goals focus on contributions
that facilitate the achievement of the corporate goals and are set during the
first quarter of each calendar year. Department goals are proposed by
each department head and approved by the Chief Executive
Officer. Senior executive goals are discussed with the Chief
Executive Officer and considered for approval by the Compensation
Committee. Annual salary increases, annual bonuses, and any stock
awards granted to our executives are tied to the achievement of these corporate,
department and individual performance goals. The Compensation
Committee has the authority to retain compensation consultants and other outside
advisors to assist in the evaluation of executive officer
compensation.
Corporate Governance and Nominating
Committee. The members of our Corporate Governance
and Nominating Committee are Messrs. Libbey, Wellard and
Wolfe. The Corporate Governance and Nominating Committee is
responsible for assisting the Board in discharging its responsibilities related
to corporate governance practices and the nomination of directors. The Corporate
Governance and Nominating Committee will, among other things, develop our
corporate governance practices, recommend procedures to assist the Board in
functioning cohesively and effectively, supervise our securities compliance
procedures and have the authority to engage outside advisors where necessary.
This committee will also be responsible for recommending to the Board director
nominees to be elected at stockholder meetings, taking into consideration the
appropriate size of the Board, the competencies and skills required and whether
each nominee can sufficiently fulfill his or her duties as a member of the
Board.
The
Corporate Governance and Nominating Committee will consider for nomination to
the Board candidates recommended by stockholders. Recommendations
should be sent to the Corporate Governance and Nominating Committee, c/o James
Parslow, Secretary, World Energy Solutions, Inc., 446 Main Street, Worcester, MA
01608. The deadline for making recommendations of director nominees
for possible inclusion in our proxy statement for our 2009 Annual Meeting of
Shareholders is described below under “Stockholder
Proposals.” Recommendations must be in writing and must contain the
information set forth in the Company’s By-Laws. The minimum qualifications and
specific qualities and skills required for a nominee for director are that the
nominee shall have the highest personal and professional integrity, shall have
demonstrated exceptional ability and judgment, and shall be most effective, in
conjunction with the other nominees to the Board, in collectively serving the
long-term interests of the stockholders. In addition to considering
candidates suggested by stockholders, the Corporate Governance and Nominating
Committee may consider potential candidates suggested by current directors,
company officers, employees, third-party search firms and others. The
Corporate Governance and Nominating Committee screens all potential candidates
in the same manner regardless of the source of the
recommendation. The Corporate Governance and Nominating Committee
determines whether the candidate meets our minimum qualifications and specific
qualities and skills for directors and whether requesting additional information
or an initial screening interview is appropriate.
PRINCIPAL
STOCKHOLDERS
The following table sets forth
information regarding the beneficial ownership of our common stock as of
February 29, 2008, by:
|
|
•
|
each
person or entity known by us to own beneficially more than 5% of either
class of our common stock;
|
|
|
•
|
each
of our directors and director nominees;
|
|
|
•
|
each
of the executive officers named in the summary compensation table; and
|
|
|
•
|
all
of our directors and executive officers as a group.
|
In accordance with SEC rules, we have
included in the number of shares beneficially owned by each stockholder all
shares over which such stockholder has sole or shared voting or investment
power, and we have included all shares that the stockholder has the right to
acquire within 60 days after February 29, 2008 through the exercise of stock
options or any other right. Unless otherwise indicated, each
stockholder has sole voting and investment power with respect to shares
beneficially owned by that stockholder. For purposes of determining the equity
and voting percentages for each stockholder, any shares that such stockholder
has the right to acquire within 60 days after February 29, 2008 are deemed
to be outstanding, but are not deemed to be outstanding for the purpose of
determining the percentages for any other stockholder.
| |
Name of Beneficial Owner
(1)
|
Number
|
Percentage
of Shares Beneficially Owned
(2)
|
| |
Richard
Domaleski / Roman Holdings Trust
|
19,145,000(3)
|
22.8%
|
| |
Winslow
Management Company LLC
|
8,566,900(4)
|
10.2%
|
| |
Manulife
Financial Corporation/Elliot & Page Limited
|
7,702,416(5)
|
9.2%
|
| |
Royce
& Associates
|
6,275,000(6)
|
7.5%
|
| |
Philip
Adams
|
2,500,000(7)
|
2.9%
|
| |
Edward
Libbey
|
1,898,448(8)
|
2.3%
|
| |
Patrick
Bischoff
|
924,339(9)
|
1.1%
|
| |
James
Parslow
|
168,750(10)
|
*
|
| |
John
Wellard
|
-
|
*
|
| |
Thad
Wolfe
|
-
|
*
|
| |
All
executive officers and directors (7 persons)
|
24,636,537(11)
|
28.9%
|
___________
|
*
|
Represents
less than 1%
|
|
(1)
|
The
address of each stockholder in the table is c/o World Energy Solutions,
Inc., 446 Main Street, Worcester, Massachusetts 01608, except that the
address of Roman Holdings Trust is 2935 Barrymore Court, Orlando, FL
32835, Winslow Management Company LLC is 99 High Street, 12th
Floor, Boston, MA 02110, Manulife Financial Corporation/Eliot & Page
Limited is 200 Bloor Street, East, Toronto, Ontario, Canada M4W 1E5, and
Royce & Associates is 1414 Avenue of the Americas, New York, NY 10019.
|
|
(2)
|
The
number of shares and percentages has been determined as of February 29,
2008 in accordance with Rule 13d-3 of the Securities Exchange Act of
1934. At that date, a total of 84,023,734 shares of common stock were
issued and outstanding, which includes 1,528,500 shares of restricted
stock that are outstanding and not yet vested.
|
|
(3)
|
Consists
of 145,000 shares held in the name of Mr. Domaleski and 19,000,000 shares
held by Dana Domaleski and David T. Bunker, as co-trustees of the Roman
Holdings Trust, of which Mr. Domaleski is the principal beneficiary. Mrs.
Domaleski and Mr. Bunker, as co-trustees, share voting and investment
power with respect to the shares held by the Roman Holdings Trust. The
trustees disclaim beneficial ownership of these shares.
|
|
(4)
|
The
amount shown and the following information are based on a Monthly
Alternative Report under National Instrument 62-103 filed with the Ontario
Securities Commission on March 10, 2008 by Winslow Management Company,
LLC.
|
|
(5)
|
The
amount shown and the following information are based on a
Schedule 13G/A filed with the SEC on January 25, 2008 by Manulife
Financial Corporation and its indirect, wholly-owned subsidiary, Elliott
& Page Limited.
|
|
(6)
|
The
amount shown and the following information is based on a
Schedule 13G/A filed with the SEC on February 6, 2008 by Royce &
Associates, LLC.
|
|
(7)
|
Includes
850,000 shares of common stock issuable upon exercise of stock options
exercisable within 60 days of February 29, 2008.
|
|
(8)
|
Includes
703,000 shares of common stock held in the name of Mr. Libbey’s wife,
Dianne Libbey, 27,397 shares of common stock issuable upon the exercise of
a warrant exercisable within 60 days of February 29, 2008 and 300,000
shares of common stock issuable upon the exercise of stock options
exercisable within 60 days of February 29, 2008.
|
|
(9)
|
Consists
of shares held by Spinnaker Ventures LLC, of which Mr. Bischoff is the
managing director and over which he holds voting and investment power.
Spinnaker Ventures LLC is owned by Bischoff Alaska LLC. Mr. Bischoff’s
children are the beneficiaries of the trust. Mr. Bischoff
disclaims beneficial ownership of these shares and is not a trustee of the
Bischoff Alaska Irrevocable Trust and holds no voting or investment power.
|
|
(10)
|
Consists
of 168,750 shares of common stock issuable upon exercise of stock options
exercisable within 60 days of February 29, 2008.
|
|
(11)
|
Includes
1,346,147 shares of common stock issuable upon exercise of stock options
and warrants exercisable within 60 days of February 29, 2008.
|
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Philosophy
At World Energy, integrity is one of our
core values. We believe in the power of open disclosure and know the
only way to build and strengthen our reputation and company is through honesty
and trust. We seek to develop a highly-motivated and collaborative
workforce holding ourselves to the highest standards of ethical behavior and
transparency. We welcome the opportunity to share this Compensation
Discussion and Analysis (CD&A) with our shareholders. The
Compensation Committee of our Board of Directors oversees our executive
compensation program. In this role, the Compensation Committee
reviews and approves annually all
compensation decisions relating to our named executive
officers.
Objectives
and Philosophy of Our Executive Compensation Program
The primary objectives of the
Compensation Committee with respect to executive compensation are
to:
|
§
|
attract,
retain and motivate the best possible executive
talent;
|
|
§
|
ensure
executive compensation is aligned with our corporate strategies and
business objectives;
|
|
§
|
promote
the achievement of key strategic and financial performance measures by
linking short- and long-term cash and equity incentives to the achievement
of measurable corporate and individual performance goals;
and
|
|
§
|
align
executives' incentives with the creation of stockholder
value.
|
To achieve these objectives, the
Compensation Committee
evaluates our executive
compensation program with the goal of setting compensation at levels the
committee believes are competitive with those of other companies in our industry
and our region that compete with us for executive talent. In
addition, our executive compensation program ties a substantial portion of each
executive’s overall compensation to key strategic,
financial and operational goals such as implementation of appropriate financing
strategies, establishment and maintenance of key strategic relationships,
growth of our customer base, as well as our financial and operational
performance, as measured by metrics such as revenue, profitability and channel
partner growth. We also
provide a portion of our executive compensation in the form of stock options
that vest over time, which we believe helps to retain our executives and aligns
their interests with those of our stockholders by allowing them to participate
in the longer term success of our company as reflected in stock price
appreciation. Given his significant
stockholdings, we have not granted any options to our Chief Executive Officer.
Our focus with our other executive officers has been to issue large stock option
grants at their date of hire with vesting over several years as opposed to
issuing new grants on a periodic basis.
We
compete with many other companies for executive personnel. Accordingly, the
Compensation Committee generally targets base salary and annual cash incentive
bonuses for executives consistent with similarly situated executives of the
companies in the peer group. Variations to this general target may occur as
dictated by the experience level of the individual and market factors. Although
2007 base salaries for our Chief Executive Officer and Chief Operating Officer
remained the same for 2007 as in 2006, our Human Resources department provided
our Compensation Committee with compensation survey data from peer companies, as
identified below. This data assists the Compensation Committee in defining
annual base and cash incentive targets going forward.
Process
for Executive Compensation Determination
The Compensation Committee is
responsible for developing and administering the compensation program for
executive officers and other key employees. All Compensation
Committee recommendations are submitted to the full Board (excluding the CEO)
for final vote and approval.
The CEO, with the assistance of our
Human Resources department, makes annual recommendations to the Compensation
Committee regarding the salaries, cash incentive payments and equity grants for
key employees, including all executive officers with the exception of the CEO
whose salary is determined by the committee.
|
·
|
Salary
increase recommendations are made after a compilation and review of
executive compensation survey data and an evaluation of individual
performance over the prior year.
|
|
·
|
Annual
cash incentive payments are primarily determined by our financial
performance and individual objectives as defined
below.
|
Our typical process for evaluating
executive compensation consists of the Compensation Committee being provided
with comprehensive information and data on the elements of executive pay for
officers and other key employees from peer companies as noted
below. The Compensation Committee uses its judgment supported by
facts and documentation in making compensation decisions that support our
philosophy and objectives. The Compensation Committee reviewed
publicly available compensation data from alternative energy companies and
comparable northeast-based public companies with revenue under $500
million. For fiscal year 2008, these companies included:
|
Peer
Company
|
2006
Annual Revenue
|
|
Kadant
|
$342mm
|
|
Moldflow
|
$56mm
|
|
Zoran
|
$100mm
|
|
Comverge
|
$41mm
|
|
Enernoc
|
$26mm
|
Components
of our Executive Compensation Program
The primary elements of our executive
compensation program contain some or all of the following:
|
§
|
annual
cash incentive bonuses;
|
|
§
|
stock
option or restricted stock awards;
|
|
§
|
insurance,
retirement and other employee benefits;
and
|
|
§
|
in
some cases, severance.
|
We have
not had any formal or informal policy or target for allocating compensation
between long-term and short-term compensation, between cash and non-cash
compensation or among the different forms of non-cash
compensation. Instead, in the event we institute long- and short-term
compensation targets, the Compensation Committee will determine subjectively
what it believes to be the appropriate level and mix of the various compensation
components. The Compensation Committee will utilize peer company
data, where available, to assist its efforts to determine such compensation
structure.
Base Salary
Base salary is used to recognize the
experience, skills, knowledge and responsibilities required of all our
employees, including our executives. When establishing base salaries
for 2007, the Compensation Committee considered a variety of factors, including
the seniority of the individual, the level of the individual’s responsibility,
the individual’s unique skills, the base salary of the individual at his or her
prior employment, if applicable, and the available market of other people with
sufficient skills, experience and abilities. Generally, we believe
that executive base salaries should be targeted near the median of the range of
salaries for executives in similar positions at comparable
companies. In the case of Philip Adams and James Parslow, the
minimum base salary is mandated by our employment agreements or offer letters
with those executives.
Base salaries are reviewed at least
annually by our Compensation Committee, and are adjusted from time to time to
realign salaries with market levels of our executive officers after taking into
account individual responsibilities, performance and experience. In
2007, we did not increase the base salaries for our Chief Executive Officer or
President and Chief Operating Officer. We did increase our Chief
Financial Officer’s salary in 2007. Although base salaries in 2007 remained in
the lowest quartile of peer salary range data, the Compensation Committee and
our Chief Executive Officer and Chief Operating Officer were willing to forego
base salary increases as they strove to build our internal infrastructure and
sales team.
Our Human
Resources department uses executive compensation survey data to gauge the market
competitiveness of our senior executives’ salaries. Recommendations
for consideration are made by the CEO and presented to the Compensation
Committee and full Board for approval. For fiscal 2008, we compared
our compensation data to that of our peers using publicly available survey data
provided by independent parties including:
|
·
|
The
Survey Group 2007 Executive Compensation Survey, a comprehensive survey
reporting on New England based companies’ executive compensation
data.
|
|
·
|
Mercer
Benchmark Database 2007 Executive Survey Data, a national survey reporting
on companies with less than $500 million in
revenue.
|
|
·
|
Economic
Research Institute, Inc., a regional survey reporting on companies in the
northeast region.
|
All three
surveys provided comprehensive data on executive compensation for our three
executive officers. We also selected and reviewed publicly available
data from alternative energy companies and other local public companies with
revenue under $500 million. These companies include Enernoc, Inc., Comverge,
Kadant, Inc., Moldflow Corporation, and Zoran Corporation.
Annual Cash Incentive
Bonus
We have an annual cash incentive bonus
plan for our executives. The annual cash incentive bonuses are
intended to compensate for the achievement of both company strategic,
operational and financial goals and individual performance
objectives. Amounts payable under the annual cash incentive bonus
plan are fixed dollar targets, with higher ranked executives typically being
compensated at a higher dollar value. The corporate targets and the
individual objectives are given roughly equal weight in the bonus analysis. The
corporate targets generally conform to the business plan approved by the Board
relating to revenue, the attainment of third party financing, if any, and the
recruitment and retention of key individuals of the management
team. Individual objectives are tied to the particular area of
expertise of the employee and their performance in attaining those objectives
relative to external forces, internal resources utilized and overall individual
effort. The Compensation Committee approves the Company and
individual performance goals for each executive, the weighting of various goals
for each executive and the determination of potential bonus amounts based on
achievement of those goals.
The Compensation Committee works with
the Chief Executive Officer to develop corporate and individual goals that they
believe can be reasonably achieved over the next year. To date, these
have been task specific goals aligned with the Company’s business
plan. We expect to continue to tie our executive bonuses to
successful completion of our strategic initiatives including the completion of
additional acquisitions, expansion of wholesale and environmental markets
business units, development of demand generation programs, and securing
strategic sales opportunities. The committee anticipates that this
model will evolve as the Company gains critical mass and returns to
profitability.
For fiscal year 2007, bonus target
parameters and the percentage of completion of those parameters for our
executive team were defined as follows:
|
2007
Corporate and Individual Bonus Targets
|
CEO
|
COO
|
CFO
|
|
Increase
Company Exposure to Investment Community
|
100%
|
100%
|
100%
|
|
Increase
Revenue Within Target Range
|
100%
|
100%
|
n/a
|
|
Completion
of Acquisition
|
100%
|
100%
|
100%
|
|
Growth
of Sales Force
|
100%
|
100%
|
n/a
|
|
Expansion
of Wholesale and Green Business
|
100%
|
100%
|
n/a
|
|
Successful
Execution of Internal/External Reporting
|
n/a
|
n/a
|
100%
|
Cash incentive bonus participants are
eligible for bonus payments ranging from 0% to 150% of their
targets. The target bonus awards for 2007 for the named executive
officers were: $100,000, $100,000 and $75,000, for Messrs. Domaleski, Adams and
Parslow, respectively. Based upon an analysis
by our Compensation Committee of the completion of the above bonus target
parameters for our three executive officers, and following a recommendation by
our Chief Executive Officer with respect to our President and Chief Operating
Officer and Chief Financial Officer, the Compensation Committee recommended and
the Board approved the following 2007 bonus payments. Mr. Domaleski was awarded
125% of his target bonus in 2007, Mr. Adams attained 100% of his 2007 target
bonus and Mr. Parslow received approximately 115% of his 2007 target bonus based
upon successful completion of defined goals for 2007 which are stated in the
above chart.
Equity Award
Our equity award program is the primary
vehicle for offering long-term incentives to our President & Chief Operating
Officer and Chief Financial Officer. We believe that equity grants
provide these executives with a strong link to our long-term performance, create
an ownership culture and help to align the interests of our executives and our
stockholders. In addition, the vesting feature of our equity
grants is intended to further our goal of executive retention because this
feature provides an incentive to our executives to
remain in
our employ during the vesting period. In determining the size of
equity grants to our executives, our Compensation Committee considers comparable
share ownership of executives in our compensation peer group, our company-level
performance, the applicable executive’s performance, the amount of equity
previously awarded to the executive, the vesting of such awards and the
recommendations of the Chief Executive Officer.
We have typically made initial
equity awards to new executives in the form of stock options. In
2007, we made an annual equity grant to our CFO as part of his overall
compensation program. The Chief Executive Officer recommended and the
Board approved a 2007 grant of 150,000 options to Mr. Parslow in an effort to
align his total compensation package, specifically the equity component, with
that of peer group CFOs and our Executive Officers. This grant and
all grants of options or restricted stock to our executives are initially
approved by the Compensation Committee and further approved by the entire
Board.
The Compensation Committee reviews all
components of the executive's compensation when determining annual equity awards
to ensure that an executive's total compensation conforms to our overall
philosophy and objectives. We intend that the annual aggregate value
of these awards will be set near median levels for companies in our compensation
peer group. Typically, any new stock we grant to our executives vest
at a rate of 25% per year over the first four years of the seven-year option
term. Vesting ceases upon termination of
employment. Exercise rights cease shortly after termination of
employment except in the case of death or disability.
We do not currently have a policy to
grant awards annually to our executive team, although the Compensation Committee
and Board may adopt such a policy in the future. We set the exercise
price of all stock options to equal the greater of the current day’s closing
price of our common stock on the Toronto Stock Exchange or the weighted average
closing price of our stock over the five previous trading days as required by
applicable Canadian law.
Benefits and Other
Compensation
We maintain broad-based benefits that
are provided to all employees, including medical and dental insurance, life and
disability insurance and a 401(k) plan. Executives are eligible
to participate in all of our employee benefit plans, in each case on the same
basis as other employees. The 401(k) Plan has a Company
contribution provision, which is subject to the Board’s
discretion. To date, no Company contributions have been made to the
Plan. The below table sets forth our general benefit
package.
|
Benefit
or Perquisite
|
All
Full-Time Employee
|
Named
Executive Officers
|
|
Health
Insurance
|
ü
|
ü
|
|
Life
Insurance
|
ü
|
ü
|
|
Long-Term
Disability
|
ü
|
ü
|
|
Paid
Time-Off
|
ü
|
ü
|
|
Retirement
Savings Plan
|
ü
|
ü
|
|
Short-Term
Disability
|
ü
|
ü
|
Employment
Agreements and Potential Payments Upon Termination or Change in
Control
We have
entered into employment agreements with certain of the named executive officers
certain material terms of which are summarized below.
Pursuant
to a letter of offer for employment with Mr. Adams, effective as of
October 1, 2003, Mr. Adams is to be paid a monthly base salary,
subject to adjustments from time to time, and is eligible to participate in all
bonus and benefit programs including the stock option plan. Mr. Adams was
also granted incentive stock options exercisable to purchase
1,250,000 shares of common stock. In the event that Mr. Adams’
employment is terminated by us for reasons other than for cause, he is entitled
to receive a severance package of six months salary at his then current rate of
pay. Based on Mr. Adams’ current annual salary of $235,000, this severance
would exceed $100,000. Mr. Adams has also entered into a non-competition
and non-solicitation agreement with us, the terms of which are summarized
below.
Pursuant
to a letter of offer for employment with Mr. Parslow effective May 15,
2006, Mr. Parslow is to be paid a monthly base salary, and is eligible to
participate in all bonus and benefit programs. Upon hire, Mr. Parslow was
also granted incentive and non-statutory stock options exercisable to purchase
up to 450,000 shares of common stock. Mr. Parslow has also entered
into a non-competition and non-solicitation agreement, the terms of which are
summarized below.
The
non-competition and non-solicitation agreement for each of Messrs. Adams
and Parslow provides that for a period of one year following the termination or
cessation of employment with us, the employee will not (i) engage in a
business that competes with our business; (ii) directly or indirectly
solicit any of our employees; or (iii) directly or indirectly solicit, hire
or engage as an independent contractor any person who was employed by us during
the employee’s term of employment with us.
We do not
currently have an employment agreement with our CEO. The CEO’s compensation is
determined by the Compensation Committee of the Board which considers a variety
of factors described in the Compensation Discussion and Analysis section above.
We believe that the CEO’s significant shareholdings align the interests of the
CEO with those of the Company as a whole.
Impact
of Regulatory Requirements
Section 162(m) of the Internal Revenue
Code of 1986, as amended, generally disallows a tax deduction for compensation
in excess of $1 million paid in any taxable year to our chief
executive officer and certain other highly compensated executive
officers. However, certain compensation, including qualified
performance-based compensation, will not be subject to the deduction limit if
certain requirements are met. The Compensation Committee reviews the
potential effect of Section 162(m) periodically and uses its judgment to
authorize compensation payments that may be subject to the limit when the
Compensation Committee believes such payments are appropriate and in the best
interests of World Energy and its stockholders after taking into consideration
changing business conditions and the performance of its
employees. The Compensation Committee expects that the majority of
compensation paid to our executive officers will be tax deductible to
us.
EXECUTIVE
OFFICERS
The
following table sets forth, as of December 31, 2007, the names, ages,
positions held with us and principal occupations and business experience for at
least the last five years of our executive officers.
|
Name
|
|
Age
|
|
Position
with the
Company
|
|
Principal
Occupation
|
|
Richard
Domaleski
|
|
38
|
|
Director
and Chief Executive Officer
|
|
Chief
Executive Officer of the Company
|
|
Philip
Adams
|
|
49
|
|
President
and Chief Operating Officer
|
|
President
and Chief Operating Officer of the Company
|
|
James
Parslow
|
|
42
|
|
Chief
Financial Officer, Treasurer and Secretary
|
|
Chief
Financial Officer, Treasurer and Secretary of the
Company
|
Richard
Domaleski. (Please see “Information as to
Directors”).
Philip
Adams. Mr. Adams has served as our President since
October 2007 and Chief Operating Officer since October 2003, and oversees our
corporate strategy, operations, marketing, direct and channel sales, finance,
IT, and human resources functions. Prior to joining us, from September 2001 to
October 2003, Mr. Adams was a principal of Go2 Market Momentum, LLC, a
consulting firm to emerging companies. Prior to that, Mr. Adams was a
senior executive at software and internet companies including Exchange
Applications, Inc., Pegasystems, Inc., Corporate Software, Inc., Rowe
Communications, Inc., and PC Connection, Inc. Mr. Adams also worked as a
strategy consultant at Corporate Decisions, Inc., a company subsequently
acquired by Mercer Consulting Inc.
James
Parslow. Mr. Parslow joined us in May 2006 and serves as
our Chief Financial Officer, Treasurer and Secretary. Mr. Parslow is a
Certified Public Accountant in Massachusetts with over 20 years experience
serving private and public companies in the alternative energy, biomedical
products and services, online auction services and high technology manufacturing
industries. Since April 2004 until joining us in 2006, Mr. Parslow was the
Chief Financial Officer and Treasurer for Spire Corporation. Prior to joining
Spire, Mr. Parslow was an independent financial consultant from January
2003 to March 2004. Prior to that, Mr. Parslow served as a senior financial
officer at high technology, alternative energy, manufacturing and internet
companies, including Fairmarket, Inc. (now Dynabazaar, Inc.) and two former
public subsidiaries of Thermo Electron Corporation: Thermo Power Corporation and
Thermo Ecotek Corporation.
EXECUTIVE
COMPENSATION
Compensation
Summary
The
following table contains information with respect to the compensation earned for
the fiscal year ended December 31, 2007 of the individuals who served as
our principal executive officer and principal financial officer in 2007 and our
only other executive officer during the fiscal year ended December 31,
2007. Such persons are referred to as our named executive
officers.
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)(1)
|
All
Other Compensation
($)
|
Total
($)
|
|
Richard
Domaleski
Chief
Executive Officer
|
2007
2006
|
$212,500
212,704
|
$125,000
75,000
|
---
---
|
---
---
|
$337,500
287,704
|
|
Philip
Adams
President
and Chief Operating Officer
|
2007
2006
|
212,500
212,704
|
100,000
75,000
|
---
---
|
---
---
|
312,500
287,704
|
|
James
Parslow Chief Financial
Officer
|
2007
2006
|
175,000
95,395(2)
|
85,000
55,000
|
56,266
18,296
|
---
---
|
316,266
168,691
|
|
(1)
|
The
amounts shown in this column reflect the dollar amounts recognized for
financial statement reporting purposes for the year ended December 31,
2007 in accordance with FAS 123R. A discussion of the
assumptions used in calculating the amounts in this column may be found in
Note 2 to our audited consolidated financial statements for the year ended
December 31, 2007 included in our Annual Report on Form 10-K filed with
the SEC on March 13, 2008.
|
|
(2)
|
Mr.
Parslow joined us as our Chief Financial Officer during 2006. His
annualized base salary was
$150,000.
|
Grants
of Plan-Based Awards
The following table shows information
concerning grants of plan-based awards made during 2007 to the named executive
officers.
2007
GRANTS OF PLAN-BASED AWARDS
|
Name
|
Grant
Date
|
Option
Awards: Number of Securities Underlying Options (#)
|
Exercise
or Base Price
of
Option Awards
($/Sh)
|
Grant
Date Fair Value of Stock and Option Awards (1)
|
|
Richard
Domaleski
|
---
|
---
|
---
|
---
|
| |
|
|
|
|
|
James
Parslow
|
5/17/07
|
150,000
(2)
|
1.34
|
92,511
|
| |
|
|
|
|
|
Philip
Adams
|
---
|
---
|
---
|
---
|
|
(1)
|
The
amounts shown in this column represent the grant date fair value of each
option award as determined in accordance with FAS
123R.
|
|
(2)
|
Granted
under the 2006 Stock Option Plan. The options vest as to one-fourth of the
total on the first anniversary of the grant date and vest quarterly
thereafter over the next 3 years. The options are subject to Mr. Parslow’s
continued employment and terminate 7 years after the grant date. All
options were granted at the fair market value on the date of grant as
determined pursuant to the terms of the 2006 Stock Option
Plan.
|
Outstanding
Equity Awards at Fiscal Year-End
The following table shows information
regarding unexercised stock options held by the named executive officers as of
December 31, 2007.
2007 OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
| |
Option
Awards
|
|
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
|
Richard
Domaleski
|
---
|
---
|
---
|
---
|
---
|
| |
|
|
|
|
|
|
James
Parslow
|
07/31/06
05/17/07
|
140,625
---
|
309,375
(1)
150,000
(1)
|
$0.95
$1.34
|
7/31/13
5/17/14
|
| |
|
|
|
|
|
|
Philip
Adams
|
10/01/03
|
850,000
|
---
|
$0.025
|
10/1/10
|
|
(1)
|
The
options vest as to one-fourth of the total on the first anniversary of the
grant date and vest quarterly thereafter over the next 3
years.
|
Option
Exercises and Stock Vested
The following table shows amounts
received by the named executive officers upon exercise of stock options and
vesting of restricted stock and restricted stock units during 2007.
2007
OPTION EXERCISES AND STOCK VESTED
| |
Option
Awards
|
Stock
Awards
|
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
|
Richard
Domaleski
|
---
|
---
|
---
|
---
|
|
James
Parslow
|
---
|
---
|
---
|
---
|
|
Philip
Adams
|
---
|
---
|
---
|
---
|
Compensation
Committee Interlocks and Insider Participation
During 2007, none of the directors who
served as members of the Compensation Committee was an executive officer or
employee of the Company during the time that he served on the Compensation
Committee.
None of our executive officers serves
as a member of the Board of Directors or Compensation Committee of any entity
that has one or more of its executive officers serving as a member of our Board
of Directors or Compensation Committee.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis included in this proxy statement with management. Based
on such review and discussion with management, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement for the 2008 Annual Meeting of
Stockholders.
| |
The Compensation
Committee
Thad
Wolfe, Chairman
Edward
Libbey
John
Wellard
|
Audit
Committee Report
The Audit Committee reviewed and
discussed our audited consolidated financial statements for the year ended
December 31, 2007 with our management. The Audit Committee also
reviewed and discussed our audited consolidated financial statements and the
matters required to be discussed by SAS No. 61 (Codification of Statements
on Auditing Standards, AU Section 380) with UHY LLP, our independent
registered public accounting firm. The Audit Committee received from UHY LLP the
written disclosures and letter required by Independence Standards Board Standard
No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees) and discussed with UHY LLP the matters
disclosed in this letter and their independence. The Audit
Committee also considered whether UHY LLP’s provision of other, non-audit
related services to us is compatible with maintaining their
independence.
Based on the reviews and discussions
referred to above, the Audit Committee recommended to our Board of Directors
that our audited consolidated financial statements be included in our Annual
Report on Form 10-K for the year ended December 31, 2007.
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The Audit
Committee
John
Wellard, Chairman
Thad
Wolfe
Edward
Libbey
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Policies
and Procedures for Related Person Transactions
Any transaction, arrangement or
relationship in which World Energy is a participant, the amount involved exceeds
$120,000, and one of our executive officers, directors, director nominees or 5%
stockholders (or their immediate family members), each of whom we refer to as a
“related person,” has a direct or indirect material interest is subject to
review and approval by the Audit Committee of our Board.
Such review and approval will, whenever
practicable, occur prior to entry into the transaction. A related
person transaction reviewed under the policy will be considered approved or
ratified if it is authorized by the Audit Committee after full disclosure of the
related person’s interest in the transaction. The committee may
approve or ratify a transaction only if the committee determines that, under all
of the circumstances, the transaction is in or is not inconsistent with the best
interests of World Energy. The committee may impose any conditions on
the related person transaction that it deems appropriate.
Equity
Compensation Plan Information
The following table provides
information, as of December 31, 2007, concerning securities authorized for
issuance under all of our equity compensation plans:
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Plan Category
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(a)
Number
of securities to be issued upon exercise of outstanding options, warrants and rights
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(b)
Weighted
average exercise price of outstanding options, warrants and rights(3)
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(c)
Number
of securities remaining available for future issuance (excluding securities in Column (a))
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Equity
compensation plans approved by security holders
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6,703,029 |
(2) |
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$ |
0.65 |
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349,661 |
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Equity
compensation plans not approved by security holders
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1,150,000 |
(1) |
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0.92 |
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-- |
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Total
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7,853,029 |
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$ |
0.69 |
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349,661 |
(4)(5) |
(1) Consists
of warrants to purchase 1,150,000 shares of our common stock issued to
underwriters in connection with our initial public offering of common
stock.
(2) Represents
shares of common stock issuable on exercise of options under the following
equity compensation plans: 2003 Stock Incentive Plan and the 2006 Stock
Incentive Plan. 4,163,029 shares of common stock (approximately 5.0%
of the total issued and outstanding common stock) relate to options under the
2003 Stock Incentive Plan. 2,540,000 shares of common stock
(approximately 3.0% of the total issued and outstanding common stock) relate to
options under the 2006 Stock Incentive Plan.
(3) This
column reflects the weighted average exercise price of outstanding options and
compensatory warrants.
(4) There
are no shares available for grant under the 2003 Stock Incentive
Plan.
(5) Our
2006 Stock Incentive Plan also provides for the issuance of restricted stock and
other stock-based awards.
As of
March 31, 2008, there were stock options issued and
outstanding to purchase 3,935,529 and 1,720,000 shares of common stock
under the 2003 and 2006 Stock Incentive Plans,
respectively, and unvested restricted stock grants representing
1,953,500 shares of common stock under the 2006 Stock Incentive Plan. To
date 400,000 shares of common stock have been issued from the vesting of
restricted stock grants under the 2006 Stock Incentive Plan.
PROPOSAL
2
TO
AMEND OUR 2006 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON
STOCK COVERED BY THE PLAN BY 4,000,000 SHARES FROM 4,738,161 TO
8,738,161
On March
4, 2008, the Board of Directors of the Company adopted, subject to stockholder
approval, an amendment to our 2006 Stock Incentive Plan, or the 2006 Plan,
increasing the number of shares of Common Stock (subject to adjustment in the
event of stock splits and other similar events) that may be issued pursuant to
awards granted under the 2006 Plan by 4,000,000 from 4,738,161 (approximately
5.6% of the currently issued and outstanding common stock of the Company) to
8,738,161 (approximately 10.4% of the currently issued and outstanding common
stock of the Company). If the reverse stock split described in
Proposal 3 below is approved and then effected, this number will adjust in
accordance therewith.
The Board
of Directors believes that the future success of the Company depends, in large
part, upon the ability of the Company to maintain a competitive position in
attracting, retaining and motivating key personnel.
Accordingly,
the Board of Directors believes the amendment to the 2006 Plan is in the best
interests of the Company and its stockholders and unanimously recommends a vote
“FOR” the amendment to the 2006 Plan in the form attached hereto as Appendix A to
increase the number of shares of common stock issuable thereunder by
4,000,000 (on a pre-reverse stock split basis).
Description
of the 2006 Plan
The
following is a brief summary of the 2006 Plan and is qualified in its entirety
by the text of the Plan set forth in Appendix A
hereto.
Types
of Awards
The 2006
Plan provides for the grant of incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code of 1986, as amended, or the Code,
non-statutory stock options, restricted stock, and other stock unit awards as
described below (and collectively referred to herein as Awards).
Incentive Stock Options and
Non-statutory Stock Options. Optionees receive the right to
purchase a specified number of shares of Common Stock at a specified option
price and subject to such other terms and conditions as are specified in
connection with the option grant. The exercise price shall not be
less than the volume weighted average trading price of the shares of common
stock of the Company on the Toronto Stock Exchange or another stock exchange on
which the majority of the trading volume and value of such shares occurs for the
five trading days immediately preceding the date on which the option is
granted. Under present law, incentive stock options and options
intended to qualify as performance-based compensation under Section 162(m) of
the Code may not be granted at an exercise price less than 100% of the fair
market value of the Common Stock on the date of grant (or less than 110% of the
fair market value in the case of incentive stock options granted to optionees
holding more than 10% of the voting power of the Company). The 2006
Plan permits the following forms of payment of the exercise price of
options: (i) payment by cash, check or in connection with a “cashless
exercise” through a broker, (ii) subject to certain conditions, delivery to the
Company of shares of Common Stock, (iii) subject to certain conditions, delivery
to the Company of a promissory note, (iv) any other lawful means of payment, or
(v) any combination of these forms of payment.
Restricted Stock
Awards. Restricted Stock Awards entitle recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares from the recipient in the event that the conditions
specified in the applicable Award are not satisfied prior to the end of the
applicable restriction period established for such Award.
Other Stock Unit
Awards. Under the 2006 Plan, the Board of Directors has the
right to grant other Awards based upon the Common Stock having such terms and
conditions as the Board of Directors may determine, including entitling
recipients to receive shares of Common Stock to be delivered in the
future.
Transferability
of Awards
Except as
the Board of Directors may otherwise determine or provide in an Award, Awards
may not be sold, assigned, transferred, pledged or otherwise encumbered by the
person to whom they are granted, either voluntarily or by operation of law,
except
by will
or the laws of descent and distribution or, other than in the case of an
incentive stock option, pursuant to a qualified domestic relations
order. During the life of the participant, Awards are exercisable
only by the participant.
Eligibility
to Receive Awards
Employees,
officers, directors, consultants and advisors of the Company and its
subsidiaries are eligible to be granted Awards under the 2006
Plan. For purposes of the 2006 Plan, “Company” includes any of World
Energy’s present or future parent or subsidiary corporations and any other
business venture in which World Energy has a significant interest as determined
by the Board. Under present law, however, incentive stock options may only be
granted to employees of World Energy and its subsidiaries.
The
maximum number of shares with respect to which Awards may be granted to any
participant under the 2006 Plan may not exceed 750,000 shares per calendar
year.
Also, the
number of Shares issuable to officers, directors and other insiders (as defined
under applicable exchange rules), as a group, under all of our equity
compensation arrangements may not exceed 10% of the outstanding shares of our
common stock as at the date of grant of any award to such a
person. Further, the number of shares of our common stock issued to
all officers, directors and other insiders, as a group, within any one-year
period under all of our equity compensation arrangements may not exceed 10% of
the outstanding shares of our common stock as at the date of grant of any award
to such a person.
Plan
Benefits
As of
February 29, 2008, approximately 68 persons were eligible to receive Awards
under the 2006 Plan, including the Company’s three executive officers and four
non-employee directors. The granting of Awards under the 2006 Plan is
discretionary, and the Company cannot now determine the number or type of Awards
to be granted in the future to any particular person or group.
On February
29, 2008, the last reported sales price of the Company’s Common Stock on the
Toronto Stock Exchange was $0.77.
Administration
The 2006
Plan is administered by the Board of Directors. The Board of
Directors has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the 2006 Plan and to interpret the
provisions of the 2006 Plan. Pursuant to the terms of the 2006 Plan,
the Board of Directors may delegate authority under the 2006 Plan to one or more
committees or subcommittees of the Board of Directors or to one or more officers
of the Company.
Subject
to any applicable limitations contained in the 2006 Plan, the Board of
Directors, the Compensation Committee, or any officer or other committee to whom
the Board of Directors delegates authority, as the case may be, selects the
recipients of Awards and determines (i) the number of shares of Common Stock
covered by options and the dates upon which such options become exercisable,
(ii) the exercise price of options, (iii) the duration of options, and (iv) the
number of shares of Common Stock subject to any option, restricted stock award
or other stock unit Award and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
The Board
of Directors is required to make appropriate adjustments in connection with the
2006 Plan and any outstanding Awards to reflect stock splits, stock dividends,
recapitalizations, spin-offs and other similar changes in
capitalization. The 2006 Plan also contains provisions addressing the
consequences of any Reorganization Event, which is defined as (i) any merger or
consolidation of the Company with or into another entity as a result of which
all of the Common Stock of the Company is converted into or exchanged for the
right to receive cash, securities or other property, or is cancelled, (b) any
exchange of all of the Common Stock of the Company for cash, securities or other
property pursuant to a share exchange transaction, or (c) any liquidation or
dissolution of the Company. In connection with a Reorganization
Event, the Board of Directors will take any one or more of the following actions
as to all or any outstanding Awards on such terms as the Board of Directors
determines: (i) provide that Awards will be assumed, or
substantially equivalent Awards will be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), (ii) upon written notice,
provide that all unexercised Options or other unexercised Awards will terminate
immediately prior to the consummation of such Reorganization Event unless
exercised within a specified period following the date of such notice,
(iii) provide that outstanding Awards will become exercisable, realizable
or deliverable, or restrictions applicable to an Award will lapse, in whole or
in part prior to or upon such Reorganization Event, (iv) in the event of a
Reorganization Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each share surrendered in
the Reorganization Event (referred to as the Acquisition Price), make or provide
for a cash payment to an Award holder equal to (A) the Acquisition Price
times the number of shares of Common Stock subject to the holder’s Awards (to
the extent the exercise price does not exceed the Acquisition Price) minus
(B) the
aggregate exercise price of all the holder’s outstanding Awards, in exchange for
the termination of such Awards, (v) provide that, in connection with a
liquidation or dissolution of the Company, Awards will convert into the right to
receive liquidation proceeds (if applicable, net of the exercise price thereof)
and (vi) any combination of the foregoing.
If any
Award expires or is terminated, surrendered, canceled or forfeited, the unused
shares of Common Stock covered by such Award will again be available for grant
under the 2006 Plan, subject, however, in the case of incentive stock options,
to any limitations under the Code.
Provisions
for Subplans
The Board
of Directors may establish subplans or procedures under the 2006 Plan to
recognize differences in laws, rules, regulations or customs of various
jurisdictions with respect to tax or securities matters.
Amendment
or Termination
No Award
may be made under the 2006 Plan after August 24, 2016, but Awards previously
granted may extend beyond that date. The Board of Directors may at
any time amend, suspend or terminate the 2006 Plan. Without limiting
the foregoing, the Board of Directors may make the following amendments to the
Plan only upon receiving both stockholder and regulatory approval:
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any
amendment to the number of shares issuable under the 2006 Plan, including
an increase to a fixed maximum number of
Shares;
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any
change to the price at which an Award becomes
exercisable;
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any
change to the definition of “participant” which would have the potential
of broadening or increasing insider
participation;
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the
addition of any form of financial assistance;
and
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any
amendment to a financial assistance provision which is more favorable to
participants.
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Without
limiting the foregoing, the Board of Directors may, without stockholder
approval (provided such approval is not required by any applicable laws or
regulations) and subject only to receipt of any requisite regulatory approval,
in its sole discretion, make all other amendments to the 2006 Plan that are not
of the type contemplated above, including, without limitation:
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amendments
of a housekeeping nature; and
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a
discontinuance of the Plan.
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The Board
of Directors determines the effect on an Award of the disability, death,
termination of employment, authorized leave of absence or other change in the
employment or other status of a participant and the extent to which, and the
period during which, the participant, or its legal representative, conservator,
guardian or beneficiary, may exercise rights under the Award.
If
stockholders do not approve the amendment to the 2006 Plan, the amendment will
not go into effect, and the number of shares of Common Stock available under the
2006 Plan will remain unchanged. In such event, the Board of
Directors will consider whether to adopt alternative arrangements based on its
assessment of the needs of the Company.
United
States Federal Income Tax Consequences
The
following is a summary of the United States federal income tax consequences that
generally will arise with respect to Awards granted under the 2006
Plan. This summary is based on the federal tax laws in effect as of
the date of this proxy statement. In addition, this summary assumes
that all Awards are exempt from, or comply with, the rules under Section 409A of
the Code regarding nonqualified deferred compensation. The plan
provides that no Award will provide for deferral of compensation that does not
comply with Section 409A of the Code, unless the Board of Directors, at the
time of grant, specifically provides that the Award is not intended to comply
with Section 409A. Changes to these laws could alter the tax
consequences described below.
Incentive
Stock Options
A
participant will not have income upon the grant of an incentive stock
option. Also, except as described below, a participant will not have
income upon exercise of an incentive stock option if the participant has been
employed by the Company or its corporate parent or 50%-or-more-owned corporate
subsidiary at all times beginning with the option grant date and ending three
months before the date the participant exercises the option. If the
participant has not been so employed during that time, then the participant will
be taxed as described below under “Non-statutory Stock Options.” The
exercise of an incentive stock option may subject the participant to the
alternative minimum tax.
A
participant will have income upon the sale of the stock acquired under an
incentive stock option at a profit (if sales proceeds exceed the exercise
price). The type of income will depend on when the participant sells
the stock. If a participant sells the stock more than two years after
the option was granted and more than one year after the option was exercised,
then all of the profit will be long-term capital gain. If a
participant sells the stock prior to satisfying these waiting periods, then the
participant will have engaged in a disqualifying disposition and a portion of
the profit will be ordinary income and a portion may be capital
gain. This capital gain will be long-term if the participant has held
the stock for more than one year and otherwise will be short-term. If
a participant sells the stock at a loss (sales proceeds are less than the
exercise price), then the loss will be a capital loss. This capital
loss will be long-term if the participant held the stock for more than one year
and otherwise will be short-term.
Non-statutory
Stock Options
A
participant will not have income upon the grant of a non-statutory stock
option. A participant will have compensation income upon the exercise
of a non-statutory stock option equal to the value of the stock on the day the
participant exercised the option less the exercise price. Upon sale
of the stock, the participant will have capital gain or loss equal to the
difference between the sales proceeds and the value of the stock on the day the
option was exercised. This capital gain or loss will be long-term if
the participant has held the stock for more than one year and otherwise will be
short-term.
Restricted
Stock Awards
A
participant will not have income upon the grant of restricted stock unless an
election under Section 83(b) of the Code is made within 30 days of the date of
grant. If a timely 83(b) election is made, then a participant will
have compensation income equal to the value of the stock less the purchase
price, if any. When the stock is sold, the participant will have capital gain or
loss equal to the difference between the sales proceeds and the value of the
stock on the date of grant. If the participant does not make an 83(b)
election, then when the stock vests the participant will have compensation
income equal to the value of the stock on the vesting date less the purchase
price, if any. When the stock is sold, the participant will have
capital gain or loss equal to the sales proceeds less the value of the stock on
the vesting date. Any capital gain or loss will be long-term if the
participant held the stock for more than one year and otherwise will be
short-term.
Other
Stock Unit Awards
The tax
consequences associated with any
other stock unit Award granted under the 2006 Plan will vary depending on the
specific terms of such Award. Among the relevant factors are whether
or not the Award has a readily ascertainable fair market value, whether or not
the Award is subject to forfeiture provisions or restrictions on transfer, the
nature of the property to be received by the participant under the Award and the
participant’s holding period and tax basis for the Award or underlying Common
Stock.
Tax
Consequences to the Company
There
will be no tax consequences to the Company except that the Company will be
entitled to a deduction when a participant has compensation
income. Any such deduction will be subject to the limitations of
Section 162(m) of the Code.
PROPOSAL
3
TO
CONSIDER AND APPROVE AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION WHICH
WOULD EFFECT A REVERSE STOCK SPLIT OF OUR COMMON STOCK IN ANY ONE OF THE
FOLLOWING RATIOS: ONE−FOR−TWO, ONE−FOR−THREE, ONE−FOR−FOUR, ONE−FOR−FIVE,
ONE−FOR−SIX, ONE−FOR−SEVEN, ONE−FOR−EIGHT, ONE−FOR−NINE, AND ONE−FOR−TEN, AT ANY
TIME PRIOR TO MAY 21, 2009, AND A PROPORTIONATE REDUCTION IN THE NUMBER OF
SHARES OF OUR COMMON STOCK AUTHORIZED FOR ISSUANCE UNDER OUR CERTIFICATE OF
INCORPORATION, WITH THE EXACT RATIO AND THE DECISION OF WHETHER AND WHEN TO
EFFECT THE REVERSE STOCK SPLIT AND AMENDMENT TO BE AT THE DISCRETION OF THE
BOARD OF DIRECTORS.
General
Our Board
of Directors has declared advisable and approved, and is hereby soliciting
stockholder approval of, an amendment to our Certificate of Incorporation, or
the Amendment, to effect a reverse stock split in any one of the following
ratios: one-for-two, one-for-three, one-for-four, one-for-five,
one-for-six, one-for-seven, one-for-eight, one-for-nine, and one-for-ten, and a
proportionate reduction in the number of shares of our common stock authorized
for issuance under our Certificate of Incorporation, substantially in the form
set forth in Appendix
B to this proxy statement if and when determined by the Board of
Directors prior to May 21, 2009. A vote “FOR” Proposal 3 will constitute
approval of this Amendment, which provides for the combination of any whole
number of shares of common stock between and including two and ten into one
share of common stock and a proportionate reduction in the number of shares of
our authorized common stock, and will grant our Board of Directors the authority
to select which, if any, of the approved exchange ratios within that range will
be implemented. If the stockholders approve this proposal, our Board of
Directors will have the authority, but not the obligation, in its sole
discretion, and without further action on the part of the stockholders, to
select one of the approved reverse stock split ratios and effect the approved
reverse stock split by filing the Amendment with the Delaware Secretary of State
at any time after the approval of the Amendment. If the Amendment has
not been filed with the Delaware Secretary of State by the close of business on
or before May 21, 2009, our Board of Directors will abandon the Amendment
constituting the reverse stock split. If the reverse stock split is implemented,
the Amendment would not change the par value of a share of common stock. Except
for any changes as a result of the treatment of fractional shares, each
stockholder will hold the same percentage of common stock outstanding
immediately prior to the reverse stock split as such stockholder held
immediately after to the reverse stock split.
We
believe that stockholder approval of an exchange ratio range (rather than an
exact exchange ratio) provides us with maximum flexibility to achieve the
purposes of the reverse stock split described below. If the stockholders vote to
approve Proposal 3, the reserve stock split will be effected, if at all, only
upon a determination by our Board of Directors that the reverse stock split is
in our and the stockholders’ best interests at that time. In connection with any
determination to effect the reverse stock split, our Board of Directors will set
the time for such a split and select a specific ratio within the range. These
determinations will be made by our Board of Directors with the intention to
create the greatest marketability for our common stock based upon prevailing
market conditions at that time.
Our Board
of Directors reserves its right to elect not to proceed, and abandon, the
reverse stock split if it determines, in its sole discretion, that this proposal
is no longer in the best interests of our stockholders.
Background
and Purpose of the Reverse Stock Split
Our
common stock currently trades on the Toronto Stock Exchange. In the future, we
may choose to list our common stock on a U.S. stock exchange either in
connection with, or independent of, the filing of a registration statement with
the Securities and Exchange Commission relating to an underwritten public
offering of our common stock. Such exchanges typically require, among
other things, as a condition to listing a company’s common stock, a minimum
market price, which is currently $4.00 or $5.00 per share on NASDAQ, depending
on which market the shares are listed. As of February 29, 2008, our current
market price was approximately $0.77.
The
purpose of the reverse stock split is to decrease the number of shares of our
common stock and presumably increase the per share trading value of our common
stock above the required minimal level to list on a U.S. stock exchange. Our
Board of Directors intends to effect the proposed reverse stock split only if it
believes that a decrease in the number of shares outstanding is likely to
improve the trading price for our common stock, and only if the implementation
of a reverse stock split is determined by our Board of Directors to be in our
and our stockholders best interest. Our Board of Directors may exercise its
discretion not to implement a reverse stock split.
Although
there can be no assurance that the price of our common stock after the reverse
stock split will actually increase in an amount proportionate to the decrease in
the number of outstanding shares, the proposal is also intended to establish a
price level for our common stock that will broaden institutional investor
interest and thereby improve liquidity.
Certain
Risk Factors Associated with the Reverse Stock Split
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While
our Board of Directors believes that a higher stock price may help
generate investor interest, there can be no assurance that the reverse
stock split will result in any particular price for our common stock or
result in a per-share price that will attract institutional investors or
investment funds or that such share price will satisfy the investing
guidelines of institutional investors or investment funds. As a result,
the trading liquidity of our common stock may not necessarily
improve.
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There
can be no assurance that the market price per new share of our common
stock after a reverse stock split will remain unchanged or increase in
proportion to the reduction in the number of old shares of our common
stock outstanding before the reverse stock split. For example, based on
the closing price of our common stock on February 29, 2008 of $0.77 per
share, if the reverse stock split was implemented and approved for a
reverse stock split ratio of l-for-10, there can be no assurance that the
post-split market price of our common stock would be $7.70 or greater.
Accordingly, the total market capitalization of our common stock after the
reverse stock split may be lower than the total market capitalization
before the reverse stock split. Moreover, in the future, the market price
of our common stock following the reverse stock split may not exceed or
remain higher than the market price prior to the reverse stock
split.
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If
the reverse stock split is effected and the market price of our common
stock declines, the percentage decline may be greater than would occur in
the absence of a reverse stock split. The market price of our common stock
will, however, also be based on performance and other factors, which are
unrelated to the number of shares outstanding. Furthermore, the liquidity
of our common stock could be adversely affected by the reduced number of
shares that would be outstanding after the reverse stock
split.
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Impact
of the Proposed Reverse Stock Split if Implemented
If
approved and effected, the reverse stock split will be realized simultaneously
and in the same ratio for all of our common stock. The reverse stock split will
affect all holders of our common stock uniformly and will not affect any
stockholder’s percentage ownership interest in us, except to the extent that the
reverse stock split would result in any holder of our common stock receiving
cash in lieu of fractional shares. As described below, holders of our common
stock otherwise entitled to fractional shares as a result of the reverse stock
split will receive a cash payment in lieu of such fractional shares. These cash
payments will reduce the number of post-reverse stock split holders of our
common stock to the extent there are concurrently stockholders who would
otherwise receive less than one share of common stock after the reverse stock
split. In addition, the reverse stock split will not affect any stockholder’s
proportionate voting power (subject to the treatment of fractional shares). The
reverse stock split will have no effect on the par value of the common
stock.
The
principal effects of the reverse stock split would be that:
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each
two to ten shares (depending on the ratio for the reverse stock split
selected by our Board of Directors) of our common stock owned by a
stockholder would be combined into one new share of common stock as
illustrated in the below table;
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the
number of shares of common stock issued and outstanding would be reduced
depending upon the reverse stock split ratio selected by our Board of
Directors as illustrated in the below
table;
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the
number of shares of common stock authorized to be issued would be
proportionately reduced based on the reverse stock split ratio selected by
our Board of Directors as illustrated in the below
table;
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based
upon the reverse stock split ratio selected by our Board of Directors,
proportionate adjustments would be made to the per-share exercise price
and the number of shares issuable upon the exercise of all outstanding
options, warrants and restricted stock awards entitling the holders to
purchase shares of common stock, which would result in approximately the
same aggregate price being required to be paid for such options and
restricted stock units upon exercise immediately preceding the reverse
stock split; and
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the
number of shares reserved for issuance under our existing stock option
plans would be reduced proportionately
based
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upon
the reverse stock split ratio selected by our Board of
Directors.
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The
following table summarizes the effect on our authorized and outstanding common
stock following each of the proposed reverse stock splits that the Board of
Directors may determine in its discretion (based on the shares of common stock
outstanding at February 29, 2008 including 1,528,500 shares of outstanding
restricted stock that are not vested). The reverse stock split will
not affect the authorized shares of preferred stock.
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Reverse Stock Split
Ratio
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Authorized Common
Stock
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Outstanding Common
Stock (approximate)
|
|
Pre-Split
|
150,000,000
|
84,023,734
|
|
1-for-2
|
75,000,000
|
42,011,867
|
|
1-for-3
|
50,000,000
|
28,007,911
|
|
1-for-4
|
37,500,000
|
21,005,934
|
|
1-for-5
|
30,000,000
|
16,804,747
|
|
1-for-6
|
25,000,000
|
14,003,956
|
|
1-for-7
|
21,428,571
|
12,003,391
|
|
1-for-8
|
18,750,000
|
10,502,967
|
|
1-for-9
|
16,666,667
|
9,335,970
|
|
1-for-10
|
15,000,000
|
8,402,373
|
In
addition, if approved and implemented, the reverse stock split may result in
some stockholders owning “odd lots” of less than 100 shares of common stock. Odd
lot shares may be more difficult to sell, and brokerage commissions and other
costs of transactions in odd lots are generally somewhat higher than the costs
of transactions in “round lots” of even multiples of 100 shares. Our Board of
Directors believes, however, that these potential effects are substantially
outweighed by the benefits of the reverse stock split.
Effective
Date
The
proposed reverse stock split of our common stock would become effective as of
5:00 p.m., Eastern Time, on the date of filing the Amendment with the office of
the Delaware Secretary of State, such date being referred to as the Effective
Date. Except as explained below with respect to fractional shares, on
such date, shares of common stock issued and outstanding immediately prior
thereto would be combined, automatically and without any action on the part of
the stockholders, into one share of our common stock in accordance with the
reverse stock split ratio determined by our Board of Directors.
The text
of the Amendment to effect the reverse stock split, if implemented by the Board
of Directors, would be in substantially the form attached hereto as Appendix B; provided,
however, that the text of the form of Amendment attached hereto is subject to
modification to include such changes as may be required by the office of the
Secretary of State of the State of Delaware and as the Board of Directors deems
necessary and advisable to effect the reverse stock split, including without
limitation the insertion of the effective time, the applicable reverse stock
split ratio determined by the Board of Directors, and the related
proportionately reduced number of shares of authorized common
stock.
After the
Effective Date, our common stock would have a new CUSIP number, which is a
number used to identify our equity securities, and stock certificates with the
older identification numbers will need to be exchanged for stock certificates
with the new numbers by following the procedures described below.
After the
Effective Date, we would continue to be subject to periodic reporting and other
requirements of the Securities Exchange Act of 1934, as amended. Our common
stock would continue to be reported on the Toronto Stock Exchange under the
symbol “XWE”. If we were to also list our common stock on a U.S.
stock exchange, a new trading symbol may be designated.
Board
of Directors Discretion to Implement the Reverse Stock Split
If the
reverse stock split is approved by our stockholders, it would be effected, if at
all, only upon a determination by our Board of Directors that a reverse stock
split (at a ratio determined by our Board of Directors as described above) is in
our and our stockholders best interests. The Board of Directors’ determination
as to whether the reverse stock split would be effected and, if so, at what
ratio, will be based upon certain factors, including existing and expected
marketability and liquidity of our common stock, prevailing market conditions,
and the likely effect on the market price of our common stock.
Authorized
Shares
Upon the
effectiveness of the reverse stock split, the number of authorized shares of our
common stock would proportionately decrease based on the reverse stock split
ratio selected by the Board of Directors. Under the Certificate of
Incorporation, we currently have the authority to issue 155,000,000 shares of
capital stock, of which 150,000,000 shares are designated as common stock and
5,000,000 shares are designated as preferred stock. As of February
29, 2008 we have 84,023,734 shares of common stock issued and outstanding
(including 1,528,500 shares of outstanding restricted stock that are not vested)
and do not have any other class of stock outstanding. The Board of
Directors believes that a decrease in the number of authorized shares of common
stock could reduce the amount of franchise taxes that the Company is required to
pay annually to the State of Delaware. Furthermore, the Board of
Directors believes that a reduction in the number of shares of common stock
authorized for issuance at the same ratio determined by the Board of Directors
with regard to the reverse stock split will leave a sufficient number of
authorized shares of common stock to maintain the requisite amount of
flexibility required by the Company’s ongoing activities.
Fractional
Shares
Stockholders
would not receive fractional post-reverse stock split shares in connection with
the reverse stock split. Instead, our transfer agent, Computershare Trust
Company, Inc., would aggregate all fractional shares and arrange for them to be
sold as soon as practicable after the Effective Date at the then prevailing
prices on the open market, on behalf of those stockholders who would otherwise
be entitled to receive a fractional share. We expect that our transfer agent
will cause the sale to be conducted in an orderly fashion at a reasonable pace
and that it may take several days to sell all of the aggregated fractional
shares of common stock. After completing the sale, stockholders would receive a
cash payment from our transfer agent in an amount equal to the stockholder’s pro
rata share of the total net proceeds of these sales. No transaction costs would
be assessed on the sale. However, the proceeds may be subject to certain taxes
as discussed below. In addition, stockholders would not be entitled to receive
interest for the period of time between the Effective Date and the date a
stockholder receives payment for the cashed-out shares. The payment amount would
be paid to the stockholder in the form of a check in accordance with the
procedures outlined below.
After the
reverse stock split, a stockholder will have no further interest in us with
respect to their cashed-out shares. A person otherwise entitled to a fractional
interest will not have any voting, dividend or other rights except to receive
payment as described above.
If a
stockholder does not hold sufficient shares of our common stock to receive at
least one share in the reverse stock split and wants to continue to hold our
common stock after the reverse stock split, a stockholder may do so by taking
either of the following actions far enough in advance so that it is completed by
the Effective Date:
|
·
|
purchase
a sufficient number of shares of our common stock so that the stockholder
holds at least an amount of shares of common stock in their account prior
to the reverse stock split that would entitle the stockholder to receive
at least one share of our common stock on a post-reverse stock split
basis; or
|
|
·
|
if
applicable, consolidate the stockholder's accounts so that the stockholder
holds at least an amount of shares of common stock in one account prior to
the reverse stock split that would entitle the stockholder to receive at
least one share of common stock on a post-reverse stock split basis.
Shares held in registered form (that is, by the stockholder in the
stockholder's name in our stock records maintained by our transfer agent)
and shares held in "street name" (that is, shares held by a stockholder
through a bank, broker or other nominee), for the same investor will be
considered held in separate accounts and will not be aggregated when
effecting the reverse stock split.
|
Stockholders
of our common stock should be aware that, under the escheat laws of the various
jurisdictions where a stockholder resides, where we are domiciled and where the
funds will be deposited, sums due for fractional interests that are not timely
claimed after the Effective Date may be required to be paid to the designated
agent for each such jurisdiction. Thereafter holders of our common stock
otherwise entitled to receive such funds may have to seek to obtain them
directly from the state to which they were paid.
Effect
on Beneficial Holders of common stock (i.e. stockholders who hold in "street
name")
Upon the
reverse stock split, we intend to treat shares held by stockholders in "street
name," through a bank, broker or other nominee, in the same manner as registered
stockholders whose shares are registered in their names. Banks, brokers or other
nominees will be instructed to effect the reverse stock split for their
beneficial holders holding our common stock in "street name". However, these
banks, brokers or other nominees may have different procedures than registered
stockholders for processing the reverse stock
split and
making payment for fractional shares. If a stockholder holds shares of our
common stock with a bank, broker or other nominee and has any questions in this
regard, stockholders are encouraged to contact their bank, broker or other
nominee.
Effect
on Registered "Book-Entry" Holders of common stock (i.e. stockholders that are
registered on our transfer agent's books and records but do not hold stock
certificates)
Certain
of our registered holders of common stock may hold some or all of their shares
electronically in book-entry form with our transfer agent. These stockholders do
not have stock certificates evidencing their ownership of our common stock. They
are, however, provided with a statement reflecting the number of shares
registered in their accounts.
If a
stockholder holds registered shares in book-entry form with our transfer agent,
no action needs to be taken to receive post-reverse stock split shares or cash
payment in lieu of any fractional share interest, if applicable. If a
stockholder is entitled to post-reverse stock split shares, a transaction
statement will automatically be sent to the stockholder's address of record
indicating the number of shares of common stock held following the reverse stock
split.
If a
stockholder is entitled to a payment in lieu of any fractional share interest, a
check will be mailed to the stockholder's registered address as soon as
practicable after the Effective Date. By signing and cashing the check,
stockholders will warrant that they owned the shares of common stock for which
they received a cash payment. The cash payment is subject to applicable federal
and state income tax and state abandoned property laws. In addition,
stockholders will not be entitled to receive interest for the period of time
between the Effective Date of the reverse stock split and the date payment is
received.
Effect
on Certificated Shares
Stockholders
holding shares of our common stock in certificate form will be sent a
transmittal letter by Computershare Trust Company, Inc. as soon as practicable
after the Effective Date. The letter of transmittal will contain instructions on
how a stockholder should surrender his or her certificate(s) representing shares
of our common stock, or the Old Certificates, to our transfer agent in exchange
for certificates representing the appropriate number of whole shares of
post-reverse stock split common stock, or the New Certificates. No New
Certificates will be issued to a stockholder until such stockholder has
surrendered all Old Certificates, together with a properly completed and
executed letter of transmittal, to our transfer agent. No stockholder will be
required to pay a transfer or other fee to exchange his, her or its
certificates.
Stockholders
will then receive a New Certificate(s) representing the number of whole shares
of common stock to which they are entitled as a result of the reverse stock
split. The New Certificate(s) will be a different color than the Old
Certificates. Until surrendered, we will deem outstanding Old
Certificates held by stockholders to be canceled and only to represent the
number of whole shares of post-reverse stock split common stock to which these
stockholders are entitled.
Any Old
Certificates submitted for exchange, whether because of a sale, transfer or
other disposition of stock, will automatically be exchanged for New
Certificates.
If an Old
Certificate has a restrictive legend on the back of the Old Certificate(s), the
New Certificate will be issued with the same restrictive legends that are on the
back of the Old Certificate(s).
If a
stockholder is entitled to a payment in lieu of any fractional share interest,
such payment will be made as described above under "Fractional
Shares".
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK
CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Accounting
Matters
The
reverse stock split will not affect the par value of a share of our common
stock. As a result, as of the Effective Date of the reverse stock split, the
stated capital attributable to common stock on our balance sheet will be reduced
proportionately based on the reverse stock split ratio (including a retroactive
adjustment of prior periods), and the additional paid-in capital account will be
credited with the amount by which the stated capital is reduced. Reported
per-share net income or loss will be higher because there will be fewer shares
of common stock outstanding.
United
States Federal Income Tax Consequences of the Reverse Stock Split
The
following is a summary of certain material United States federal income tax
consequences of the reverse stock split and does not purport to be a complete
discussion of all of the possible federal income tax consequences of the reverse
stock split. This summary is included for general information only. Further, it
does not address any state, local or non-U.S. income or other tax consequences.
Also, it does not address the tax consequences to holders that are subject to
special tax rules, such as banks, insurance companies, regulated investment
companies, personal holding companies, foreign persons or entities, nonresident
alien individuals, broker-dealers and tax-exempt entities. The discussion is
based on the provisions of the United States federal income tax law as of the
date hereof, which is subject to change retroactively as well as prospectively.
This summary also assumes that the pre-reverse stock split shares were, and the
post-reverse stock split shares will be, held as a "capital asset," as defined
in the Internal Revenue Code of 1986, as amended (i.e., generally, property held
for investment). The tax treatment of a stockholder may vary depending upon the
particular facts and circumstances of such stockholder. Each stockholder is
urged to consult with such stockholder’s own tax advisor with respect to the tax
consequences of the reverse stock split. As used herein, the term United States
holder means a stockholder that is, for U.S. federal income tax purposes: a
citizen or resident of the United States; a corporation, partnership or other
entity taxed as a corporation or partnership for United States federal income
tax purposes that was created or organized in or under the laws of the United
States, any state of the United States or the District of Columbia; an estate
the income of which is subject to federal income tax regardless of its source;
or a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decision of the trust.
Other
than the cash payments for fractional shares discussed below, no gain or loss
should be recognized by a stockholder upon such stockholder's exchange of
pre-reverse stock split shares for post-reverse stock split shares pursuant to
the reverse stock split.
Following
the reverse stock split (including any fraction of a post-reverse stock split
share deemed to have been received), the tax basis will be the same as the
stockholder's aggregate tax basis in the pre-reverse stock split shares
exchanged therefor. In general, stockholders who receive cash in exchange for
their fractional share interests in the post-reverse stock split shares as a
result of the reverse stock split will recognize gain or loss based on their
adjusted basis in the fractional share interests redeemed. The stockholder's
holding period for the post-reverse stock split shares will include the period
during which the stockholder held the pre-reverse stock split shares surrendered
in the reverse stock split. The receipt of cash instead of a fractional share of
common stock by a United States holder of common stock will result in a taxable
gain or loss to such holder for U.S. federal income tax purposes based upon the
difference between the amount of cash received by such holder and the adjusted
tax basis in the fractional shares as set forth above. The gain or loss will
constitute a capital gain or loss and will constitute long-term capital gain or
loss if the holder's holding period is greater than one year as of the Effective
Date.
Our view
regarding the tax consequences of the reverse stock split is not binding on the
Internal Revenue Service or the courts. Accordingly, each stockholder should
consult with his, her or its own tax advisor with respect to all of the
potential tax consequences to such stockholder or her of the reverse stock
split.
TO ENSURE
COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, STOCKHOLDERS ARE HEREBY
NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS PROXY STATEMENT
IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY
STOCKHOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON
STOCKHOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED
HEREIN BY THE COMPANY IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE
MEANING OF CIRCULAR 230) BY THE COMPANY OF THE TRANSACTIONS OR MATTERS ADDRESSED
HEREIN; AND (C) STOCKHOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR
CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
The
Board unanimously recommends a vote "FOR" the proposal to authorize an amendment
to our Certificate of Incorporation which would effect a reverse stock split of
our common stock in any one of the following ratios: one−for−two, one−for−three,
one−for−four, one−for−five, one−for−six, one−for−seven, one−for−eight,
one−for−nine, and one−for−ten, at any time prior to May 21, 2009, and a
proportionate reduction in the number of shares of our common stock authorized
for issuance under our Certificate of Incorporation, with the exact ratio and
the decision of whether and when to effect the reverse stock split and the
amendment to be at the discretion of the Board of Directors.
PROPOSAL
4
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Although Delaware law does not require
that the selection by the Audit Committee of our independent registered public
accounting firm be approved each year by the stockholders, the members of the
Audit Committee and the other members of the Board believe it is appropriate to
submit the selection of the independent registered public accounting firm to the
stockholders for their ratification. The Audit Committee and the Board recommend
that the stockholders ratify the selection of UHY LLP (“UHY”) as our independent
registered public accounting firm for 2008. If the stockholders do not ratify
the selection of UHY, the Audit Committee will reconsider its
selection.
We expect that representatives of UHY
will be present at the annual meeting. They will be given the
opportunity to make a statement if they desire to do so and will also be
available to respond to questions from stockholders.
During 2007, UHY provided various
audit, audit-related and tax services to us. The Audit Committee has
adopted policies and procedures which require the Audit Committee to pre-approve
all audit and non-audit services performed by UHY in order to assure that the
provision of such services does not impair UHY’s independence. The term of any
pre-approval is twelve months from the date of pre-approval, unless the Audit
Committee specifically provides for a different period, and the Audit Committee
sets specific limits on the amount of each such service we obtain from
UHY.
The aggregate fees incurred for
professional services by UHY in 2006 and 2007 for audit, audit-related, tax and
non-audit services were:
|
Type
of Fees
|
|
2006
|
|
2007
|
| |
|
|
|
|
|
Audit
Fees:
|
|
$447,503
|
|
$342,749
|
|
Audit-Related
Fees:
|
|
---
|
|
31,950
|
|
Tax
Fees:
|
|
20,000
|
|
27,000
|
|
All
Other Fees:
|
|
---
|
|
---
|
|
Total:
|
|
$467,503
|
|
$401,699
|
Audit fees include fees we paid UHY for
professional services for the audit of our annual financial statements and audit
of the effectiveness of our internal controls over financial reporting included
in our annual report on Form 10-K, review of financial statements included in
our quarterly reports on Form 10-Q, and for services that are normally provided
in connection with statutory and regulatory filings or engagements, such as
comfort letters and consents. Audit fees for 2007 include all costs
associated with our acquisition of EnergyGateway LLC, including audited
financial statements for regulatory requirements. Audit fees for 2006
include all costs associated with our initial public offering, including the
audits related to our 2003 and 2004 fiscal year ends and reviews associated with
the six-month periods ended June 30, 2006 and 2005. Audit related
fees include services rendered for accounting and tax consultation. Tax fees
include fees for tax compliance and tax advice. There were no other professional
services rendered by UHY in 2006 or 2007.
The firm of UHY LLP (“UHY”) acts as our
principal independent registered public accounting firm. Through and
as of March 13, 2008, UHY had a continuing relationship with UHY Advisors, Inc.
(“Advisors”) from which it leased auditing staff who were full time, permanent
employees of Advisors and through which UHY’s partners provide non-audit
services. UHY has only a few full time employees. Therefore, few, if
any, of the audit services performed were provided by permanent full-time
employees of UHY. UHY manages and supervises the audit services and
audit staff, and is exclusively responsible for the opinion rendered in
connection with its examination.
Holders of voting rights sufficient to
ratify the selection of UHY as our independent registered public accounting firm
have indicated to us an intention to vote in favor of this
proposal.
The Audit Committee and the Board of
Directors recommend that stockholders vote “FOR” the ratification of the
selection of UHY LLP as our independent registered public accounting firm for
2008.
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee
record holders may be participating in the practice of “householding” proxy
statements and annual reports. This means that only one copy of our
proxy statement or annual report may have been sent to multiple stockholders in
your household. We will promptly deliver a separate copy of either
document to you if you call or write us at the following address or telephone
number: World Energy Solutions, Inc., 446 Main Street, Worcester, MA
01608, Attention: James Parslow, Secretary, (508) 459-8100. If you
want to receive separate copies of the annual report and proxy statement in the
future, or if you are receiving multiple copies and would like to receive only
one copy for your household, you should contact your bank, broker or other
nominee record holder, or you may contact us at the above address and telephone
number.
STOCKHOLDER
PROPOSALS
In order
for any stockholder proposal to be included in the proxy statement for our 2009
Annual Meeting of Stockholders, such proposal must be received at our principal
executive offices, 446 Main Street, Worcester, MA 01608, Attention: James
Parslow, Secretary, not later than December 22, 2008 and must satisfy certain
rules of the SEC.
Nominations and proposals of
stockholders (other than proposals made in accordance with Rule 14a-8 of the
Securities Exchange Act of 1934) may also be submitted to us for consideration
at the 2009 Annual Meeting if certain conditions set forth in our bylaws are
satisfied. Such nominations (and other stockholder proposals) must be
received in writing by us not less than 90 days nor more than 120 days prior to
the first anniversary of the 2008 Annual Meeting, which dates will be February
21, 2009 and January 22, 2009, respectively. If the date of the
2009 Annual Meeting is advanced by more than 20 days, or delayed by more than 60
days, from the first anniversary of the 2008 Annual Meeting, nominations or
other proposals must be received not earlier than the 120th day
prior to the 2009 Annual Meeting and not later than the close of business on the
later of the 90th day
prior to the 2009 Annual Meeting and the 10th day
following the day on which notice of the 2009 Annual Meeting was mailed or
public disclosure of the date of 2009 Annual Meeting was made, whichever occurs
first. To submit a nomination or other proposal, a stockholder should
send the nominee's name or proposal and appropriate supporting information
required by our bylaws to the attention of our Secretary at the address provided
above.
Appendix
A
WORLD
ENERGY SOLUTIONS, INC.
2006 STOCK INCENTIVE
PLAN
1.
Purpose
The
purpose of this 2006 Stock Incentive Plan (the “Plan”) of World Energy
Solutions, Inc., a Delaware corporation (the
“Company”), is to advance the interests of the Company’s stockholders by
enhancing the Company’s ability to attract, retain and motivate persons who are
expected to make important contributions to the Company and by providing such
persons with equity ownership opportunities and performance-based incentives
that are intended to align their interests with those of the Company’s
stockholders. Except where the context otherwise requires, the term
“Company” shall include any of the Company’s present or future parent or
subsidiary corporations as defined in Sections 424(e) or (f) of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the “Code”) and any other business venture (including, without
limitation, joint venture or limited liability company) in which the Company has
a controlling interest, as determined by the Board of Directors of the Company
(the “Board”).
2.
Eligibility
All of
the Company’s employees, officers, directors, consultants and advisors are
eligible to receive Options, Restricted Stock Awards or Other Stock Unit Awards
(each, an “Award”) under the Plan. Each person who receives an Award
under the Plan is deemed a “Participant”.
|
3.
|
Administration and
Delegation
|
(a)
Administration by
Board of Directors. The Plan will be administered by the
Board. The Board shall have authority to (i) grant Awards to
Participants; (ii) determine the terms, including any limitation, restrictions
or conditions, applicable to such Awards and (iii) adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable, subject to any required approval by any applicable regulatory
authority. The Board may construe and interpret the terms of the Plan
and any Award agreements entered into under the Plan. The Board may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award in the manner and to the extent it shall deem expedient to
carry the Plan into effect and it shall be the sole and final judge of such
expediency. All decisions by the Board shall be made in the Board’s
sole discretion and shall be final and binding on all persons having or claiming
any interest in the Plan or in any Award. No director or person
acting pursuant to the authority delegated by the Board shall be liable for any
action or determination relating to or under the Plan made in good
faith.
(b)
Appointment of
Committees. To the extent permitted by applicable law, the
Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a “Committee”). All
references in the Plan to the “Board” shall mean the Board or a Committee of the
Board or the officers referred to in Section 3(c) to the extent that the Board’s
powers or authority under the Plan have been delegated to such Committee or
officers.
(c)
Delegation to
Officers. To the extent permitted by applicable law, the Board
may delegate to one or more officers of the Company the power to grant Awards to
employees or officers of the Company or any of its present or future subsidiary
corporations and to exercise such other powers under the Plan as the Board may
determine, provided that the Board shall fix the terms of the Awards to be
granted by such officers (including the exercise price of such Awards, which may
include a formula by which the exercise price will be determined) and the
maximum number of Shares (as defined below) subject to Awards that the officers
may grant; provided further, however, that no officer shall be authorized to
grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or
to any "officer" of the Company (as defined by Rule 16a-1 under the Exchange
Act).
4.
Stock Available for
Awards
(a)
Number of
Shares. Subject to any adjustment under Section 8, Awards may
be made under the Plan for up to 8,738,161 shares ("Shares") of common
stock, $.0001 par value per share, of the Company (the “Common
Stock”).
If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised, is forfeited in whole or in part (including as the result of
Shares of Common Stock subject to such Award being repurchased by the Company at
the original issuance
price
pursuant to a contractual repurchase right), is settled in cash or otherwise, or
results in any Common Stock not being issued, the unused Common Stock covered by
such Award shall again be available for the grant of Awards under the Plan.
Further, Shares of Common Stock tendered to the Company by a Participant to
exercise an Award (including shares issuable under such Award) shall be added to
the number of Shares of Common Stock available for the grant of Awards under the
Plan. However, in the case of Incentive Stock Options (as hereinafter defined),
the foregoing provisions shall be subject to any limitations under the
Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued Shares or treasury Shares.
(b)
Per-Participant
Limit. Subject to adjustment under Section 8, for Awards
granted after the Common Stock is registered under the Exchange Act, the maximum
number of Shares of Common Stock with respect to which Awards may be granted to
any Participant under the Plan shall be 750,000 during any twelve-month
period. The per-Participant limit described in this Section 4(b)
shall be construed and applied consistently with Section 162(m) of the Code or
any successor provision thereto, and the regulations thereunder.
(c)
Insider
Limits.
(1) The number of Shares
issuable to all Insiders (as defined below), as a group, at any time, under all
of the Company’s security based compensation arrangements (as defined under the
rules of the Toronto Stock Exchange) shall not exceed 10% of the outstanding
Shares of Common Stock of the Company as at the date of grant of any Award to an
Insider.
(2)
The number of Shares issued to all Insiders (as defined below), as a group,
within any one-year period under all of the Company’s security based
compensation arrangements (as defined under the rules of the Toronto Stock
Exchange) shall not exceed 10% of the outstanding Shares of Common Stock of the
Company on the date of grant of any Award by an Insider.
(3)
“Insider” means:
|
|
(i)
|
every
director or senior officer of the Company;
|
|
|
(ii)
|
every
director or senior officer of a company that is itself an Insider or
subsidiary of the Company;
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(iii)
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any
person or company who beneficially owns, directly or indirectly, voting
Shares of the Company or who exercises control or direction over voting
Shares of the Company, or a combination of both, carrying more than 10
percent of the voting rights attached to all voting Shares of the Company
for the time being outstanding, other than voting Shares held by the
person or company as underwriter in the course of a distribution;
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(iv)
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the
Company, where it has purchased, redeemed or otherwise acquired any of its
Shares, for so long as it holds any of its Shares;
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in the
case of each of clauses (i) through (iv), other than a person who is an Insider
solely by virtue of being a director or senior officer of a subsidiary of the
Company; or
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(v)
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an
Associate (as defined below) of any person who is an Insider by virtue of
the above.
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“Associate” where used to indicate a
relationship with any person or company, means: (i) any company of which such
person or company beneficially owns, directly or indirectly, voting securities
carrying more than 10 percent of the voting rights attached to all voting
securities of the company for the time being outstanding; (ii) any partner of
that person or company; (iii) any trust or estate in which such person or
company has a substantial beneficial interest or as to which such person or
company serves as trustee or in a similar capacity; (iv) any relative of that
person who resides in the same home as that person; (v) any person who resides
in the same home as that person and to whom that person is married or with whom
that person is living in a conjugal relationship outside marriage; or (vi) any
relative of a person mentioned in clause (v) who has the same home as that
person.
(d)
Substitute
Awards. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Awards in substitution for any options or
other stock or stock based awards granted by such entity or an affiliate
thereof. Substitute Awards may be granted on such terms as the Board
deems appropriate in the circumstances, notwithstanding any limitations on
Awards contained in the Plan. Substitute Awards shall not count
against the overall Share limit set forth in Section 4(a) except as may be
required by reason of Section 422 and related provisions of the Code and subject
to any requisite approval by the Toronto Stock Exchange.
5.
Stock
Options
(a)
General. The
Board may grant options to purchase Common Stock (each, an “Option”) and
determine the number of Shares of Common Stock to be covered by each Option, the
exercise price of each Option and the conditions and limitations applicable to
the exercise of each Option, including conditions relating to applicable federal
or state securities laws, as it considers necessary or
advisable. Each Option will be governed by an agreement in a form
determined by the Board. An Option that is not intended to be an
Incentive Stock Option (as hereinafter defined) shall be designated a
“Nonstatutory Stock Option”.
(b)
Incentive Stock
Options. An Option that the Board intends to be an “incentive
stock option” as defined in Section 422 of the Code (an “Incentive Stock
Option”) shall only be granted to employees of the Company, any of the Company’s
present or future parent or subsidiary corporations as defined in Sections
424(e) or (f) of the Code, and any other entities the employees of which are
eligible to receive Incentive Stock Options under the Code, and shall be subject
to and shall be construed consistently with the requirements of Section 422 of
the Code. The Company shall have no liability to a Participant, or
any other party, if an Option (or any part thereof) that is intended to be an
Incentive Stock Option is not an Incentive Stock Option or for any action taken
by the Board, including without limitation the conversion of an Incentive Stock
Option to a Nonstatutory Stock Option.
(c)
Exercise
Price. The Board shall establish the exercise price of each
Option and specify such exercise price in the applicable option agreement,
provided that such price shall not be less than the volume weighted average
trading price of the Shares of Common Stock of the Company on the Toronto Stock
Exchange or another stock exchange on which the majority of the trading volume
and value of such Shares occurs for the five trading days immediately preceding
the date on which the Option is granted.
(d)
Duration of
Options. Each Option shall be exercisable at such times and
subject to such terms and conditions, and in installments or pursuant to a
vesting schedule, as the Board may specify in the applicable option
agreement.
(e)
Exercise of
Option. Options may be exercised by delivery to the Company of
a written notice of exercise signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board together with payment
in full as specified in Section 5(f) for the number of Shares for which the
Option is exercised. Shares of Common Stock subject to the Option
will be delivered by the Company following exercise either as soon as
practicable or, subject to such conditions as the Board shall specify, on a
deferred basis (with the Company’s obligation to be evidenced by an instrument
providing for future delivery of the deferred Shares at the time or times
specified by the Board).
(f)
Payment Upon
Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1)
in cash or by check, payable to the order of the Company;
(2)
except as may otherwise be provided in the applicable option agreement, by (i)
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price and any required tax withholding or (ii) delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions to a
creditworthy broker to deliver promptly to the Company cash or a check
sufficient to pay the exercise price and any required tax
withholding;
(3)
to the extent provided for in the applicable option agreement or approved by the
Board in its discretion, by delivery (either by actual delivery or attestation)
of Shares of Common Stock owned by the Participant valued at their fair market
value, provided that for the purposes hereof, fair market value shall mean the
volume weighted average trading price of the Shares of Common Stock of the
Company on the Toronto Stock Exchange or another stock exchange on which the
majority of the trading volume and value of such Shares occurs for the five
trading days immediately preceding the date on which the Option is exercised (or
if the shares are not so traded, in the good faith determination of the Board);
and further provided that (i) such method of payment is then permitted under
applicable law, (ii) such Common Stock, if acquired directly from the Company,
was owned by the Participant for such minimum period of time, if any, as may be
established by the Board in its discretion and (iii) such Common Stock is not
subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements;
(4)
to the extent permitted by applicable law and provided for in the applicable
option agreement or approved by the Board, by (i) delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or
(ii) payment of such other lawful consideration as the Board may determine;
or
(5)
by any combination of the above permitted forms of payment.
6.
Restricted
Stock.
(a)
General. The
Board may grant Awards entitling recipients to acquire Shares of Common Stock,
subject to the right of the Company to repurchase all or part of such Shares at
their issue price or other stated or formula price (or to require forfeiture of
such Shares if issued at no cost) from the recipient in the event that
conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable restriction period or periods established by
the Board for such Award (each, a “Restricted Stock Award”).
(b)
Terms and
Conditions. The Board shall determine the terms and conditions
of a Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price, if any.
(c)
Stock
Certificates. Any stock certificates issued in respect of a
Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its
designee). At the expiration of the applicable restriction periods,
the Company (or such designee) shall deliver the certificates no longer subject
to such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant’s death (the “Designated Beneficiary”). In the absence of
an effective designation by a Participant, “Designated Beneficiary” shall mean
the Participant’s estate.
7.
Other Stock Unit
Awards.
Other Awards of Shares of Common Stock,
and other Awards that are valued in whole or in part by reference to, or are
otherwise based on, Shares of Common Stock or other property, may be granted
hereunder to Participants (“Other Stock Unit Awards”), including without
limitation Awards entitling recipients to receive Shares of Common Stock to be
delivered in the future. Such Other Stock Unit Awards shall also be
available as a form of payment in the settlement of other Awards granted under
the Plan or as payment in lieu of compensation to which a Participant is
otherwise entitled. Other Stock Unit Awards may be paid in Shares of
Common Stock or cash, as the Board shall determine. Subject to the
provisions of the Plan, the Board shall determine the terms and conditions of
each Other Stock Unit Award, including any purchase price applicable
thereto.
8.
Adjustments for
Changes in Common Stock and Certain Other Events.
(a)
Changes in
Capitalization. In the event of any stock split, reverse stock
split, stock dividend, recapitalization, combination of Shares, reclassification
of Shares, spin-off or other similar change in capitalization or event, or any
distribution to holders of Common Stock other than an ordinary cash dividend,
(i) the number and class of securities available under this Plan, (ii) the
per-Participant limit set forth in Section 4(b), (iii) the number and class of
securities and exercise price per Share of each outstanding Option, (iv) the
repurchase price per Share subject to each outstanding Restricted Stock Award
and (v) the Share- and per-Share-related provisions and the purchase price, if
any, of each outstanding Other Stock Unit Award, shall be appropriately adjusted
by the Company (or substituted Awards may be made, if applicable) to the extent
determined by the Board.
(b)
Reorganization
Events
(1)
Definition. A
“Reorganization Event” shall mean: (a) any merger or consolidation of
the Company with or into another entity as a result of which all of the Common
Stock of the Company is converted into or exchanged for the right to receive
cash, securities or other property or is cancelled, (b) any exchange of all of
the Common Stock of the Company for cash, securities or other property pursuant
to a share exchange transaction or (c) any liquidation or dissolution of the
Company.
(2)
Consequences of a
Reorganization Event on Awards Other than Restricted Stock
Awards. In connection with a Reorganization Event, the Board
shall take any one or more of the following actions as to all or any outstanding
Awards other than Restricted Stock Awards on such terms as the Board
determines: (i) provide that Awards shall be assumed, or
substantially equivalent Awards shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), (ii) upon written notice
to a Participant, provide that the Participant’s unexercised Options or other
unexercised Awards will terminate immediately prior to the consummation of such
Reorganization Event unless exercised by the Participant within a specified
period following the date of such notice, (iii) provide that outstanding
Awards shall become exercisable, realizable or deliverable, or restrictions
applicable to an Award shall lapse, in whole or in part prior to or upon such
Reorganization Event, (iv) in the event of a Reorganization Event under the
terms of which holders of Common Stock will receive upon consummation thereof a
cash payment for each Share surrendered in the Reorganization Event (the
“Acquisition Price”), make or provide for a cash payment to a Participant equal
to the excess, if any, of (A) the Acquisition Price times the number of
Shares of Common Stock subject to the Participant’s Options or other Awards (to
the extent the exercise price does not exceed the Acquisition Price) over (B)
the aggregate exercise price of all such outstanding Options or other Awards and
any applicable tax withholdings, in exchange for the termination of such Options
or other Awards, (v) provide that, in connection with a liquidation or
dissolution of the Company, Awards shall convert into the right to receive
liquidation proceeds (if applicable, net of the exercise price
thereof)
and (vi) any combination of the foregoing.
For purposes of clause (i) above, an
Option shall be considered assumed if, following consummation of the
Reorganization Event, the Option confers the right to purchase, for each Share
of Common Stock subject to the Option immediately prior to the consummation of
the Reorganization Event, the consideration (whether cash, securities or other
property) received as a result of the Reorganization Event by holders of Common
Stock for each Share of Common Stock held immediately prior to the consummation
of the Reorganization Event (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares of Common Stock); provided, however, that if the
consideration received as a result of the Reorganization Event is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or succeeding
corporation, provide for the consideration to be received upon the exercise of
Options to consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in value (as determined by the
Board) to the per Share consideration received by holders of outstanding Shares
of Common Stock as a result of the Reorganization Event.
(3)
Consequences of a
Reorganization Event on Restricted Stock Awards. Upon the
occurrence of a Reorganization Event other than a liquidation or dissolution of
the Company, the repurchase and other rights of the Company under each
outstanding Restricted Stock Award shall inure to the benefit of the Company’s
successor and shall, unless the Board determines otherwise, apply to the cash,
securities or other property which the Common Stock was converted into or
exchanged for pursuant to such Reorganization Event in the same manner and to
the same extent as they applied to the Common Stock subject to such Restricted
Stock Award. Upon the occurrence of a Reorganization Event involving
the liquidation or dissolution of the Company, except to the extent specifically
provided to the contrary in the instrument evidencing any Restricted Stock Award
or any other agreement between a Participant and the Company, all restrictions
and conditions on all Restricted Stock Awards then outstanding shall
automatically be deemed terminated or satisfied.
9.
General Provisions
Applicable to Awards
(a)
Transferability of
Awards. Awards shall not be sold, assigned, transferred,
pledged or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution or, other than in the case of an Incentive Stock Option, pursuant
to a qualified domestic relations order, and, during the life of the
Participant, shall be exercisable only by the Participant; provided, however,
that the Board may permit or provide in an Award for the gratuitous transfer of
the Award by the Participant to or for the benefit of any immediate family
member, family trust or other entity established for the benefit of the
Participant and/or an immediate family member thereof if, with respect to such
proposed transferee, the Company would be eligible to use a Form S-8 for the
registration of the sale of the Common Stock subject to such Award under the
Securities Act of 1933, as amended; provided, further, that the Company shall not be
required to recognize any such transfer until such time as the Participant and such permitted
transferee shall, as a condition to such transfer, deliver to the Company a
written instrument in form and substance satisfactory to the Company confirming
that such transferee shall be bound by all of the terms and conditions of the
Award. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b)
Documentation. Each
Award shall be evidenced in such form (written, electronic or otherwise) as the
Board shall determine. Each Award may contain terms and conditions in
addition to those set forth in the Plan.
(c)
Board
Discretion. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other
Award. The terms of each Award need not be identical, and the Board
need not treat Participants uniformly.
(d)
Termination of
Status. The Board shall determine the effect on an Award of
the disability, death, termination of employment, authorized leave of absence or
other change in the employment or other status of a Participant and the extent
to which, and the period during which, the Participant, or the Participant’s
legal representative, conservator, guardian or Designated Beneficiary, may
exercise rights under the Award.
(e)
Withholding. The
Participant must satisfy all applicable federal, state, and local or other
income and employment tax withholding obligations before the Company will
deliver stock certificates or otherwise recognize ownership of Common Stock
under an Award. The Company may decide to satisfy the withholding
obligations through additional withholding on salary or wages. If the
Company elects not to or cannot withhold from other compensation, the
Participant must pay the Company the full amount, if any, required for
withholding or have a broker tender to the Company cash equal to the withholding
obligations. Payment of withholding obligations is due before the
Company will issue any Shares on exercise or release from forfeiture of an Award
or, if the Company so requires, at the same time as is payment of the exercise
price unless the Company determines otherwise. If provided for in an
Award or approved by the Board in its sole discretion, a Participant may satisfy
such tax obligations in whole or in part by delivery of Shares of Common Stock,
including Shares retained from the Award creating the tax obligation, valued at
their Fair Market Value; provided, however, except as
otherwise
provided by the Board, that the total tax withholding where stock is being used
to satisfy such tax obligations cannot exceed the Company’s minimum statutory
withholding obligations (based on minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
such supplemental taxable income). Shares surrendered to satisfy tax
withholding requirements cannot be subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(f)
Amendment of
Award. Subject to any required prior approval of any
applicable regulatory authority, the Board may amend, modify or terminate any
outstanding Award in any manner to the extent that the Board would have had the
authority to initially grant the Award as so modified or amended, including but
not limited to, (i) substituting therefor another Award of the same or a
different type, (ii) changing the date of exercise or realization, (iii)
changing the vesting provisions of an Award, (iv) changing the termination
provisions of an Award (provided that such change does not extend the date on
which the Award would have expired without regard to a termination of employment
or other relationship with the Company) and (v) converting an Incentive Stock
Option to a Nonstatutory Stock Option, provided in each case that either (A) the
Participant’s consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant or (B) the change is permitted
under Section 8 hereof.
(g)
Conditions on Delivery
of Stock. The Company will not be obligated to deliver any
Shares of Common Stock pursuant to the Plan or to remove restrictions from
Shares previously delivered under the Plan until (i) all conditions of the Award
have been met or removed to the satisfaction of the Company, (ii) in the
opinion of the Company’s counsel, all other legal matters in connection with the
issuance and delivery of such Shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations.
(h)
Acceleration. The
Board may at any time provide that any Award shall become immediately
exercisable in full or in part, free of some or all restrictions or conditions,
or otherwise realizable in full or in part, as the case may be.
(i)
No Fractional
Shares. No fractional Shares may be issued and the Board may
determine the manner in which fractional Share value will be
treated.
10.
Miscellaneous
(a)
No Right To Employment
or Other Status. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment or any other relationship with the
Company. The Company expressly reserves the right at any time to
dismiss or otherwise terminate its relationship with a Participant free from any
liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b)
No Rights As
Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any Shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such
Shares. Notwithstanding the foregoing, in the event the Company
effects a split of the Common Stock by means of a stock dividend and the
exercise price of and the number of Shares subject to such Option are adjusted
as of the date of the distribution of the dividend (rather than as of the record
date for such dividend), then an optionee who exercises an Option between the
record date and the distribution date for such stock dividend shall be entitled
to receive, on the distribution date, the stock dividend with respect to the
Shares of Common Stock acquired upon such Option exercise, notwithstanding the
fact that such Shares were not outstanding as of the close of business on the
record date for such stock dividend.
(c)
Effective Date and
Term of Plan. The Plan shall become effective on the date on
which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of 10 years from the earlier of (i) the date on
which the Plan was adopted by the Board or (ii) the date the Plan was approved
by the Company’s stockholders, but Awards previously granted may extend beyond
that date.
(d)
Amendment of
Plan. Subject to receipt of the requisite stockholder and
regulatory approvals set forth in subsections (d)(1) and (2) below, the Board
may, from time to time, amend, suspend or terminate the Plan or any portion
thereof at any time; provided that no such amendment or revision requiring
stockholder approval under any applicable legal, regulatory or listing
requirement shall become effective until such stockholder approval is
obtained.
(1)
Without limiting the foregoing, the Board may make the following amendments to
the Plan only upon receiving both stockholder and regulatory
approval:
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(a)
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any
amendment to the number of Shares issuable under the Plan, including an
increase to a fixed
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maximum
number of Shares;
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(b)
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any
change to the price at which an Award becomes
exercisable;
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(c)
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any
change to the definition of “Participant” which would have the potential
of broadening or increasing Insider (as defined above) participation;
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(d)
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the
addition of any form of financial assistance;
and
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(e)
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any
amendment to a financial assistance provision which is more favourable to
Participants.
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(2)
Without limiting the foregoing, the Board may, without stockholder approval and
subject only to receipt of any requisite regulatory approval, in its sole
discretion, make all other amendments to the Plan that are not of the type
contemplated in Section 10(d)(1) above, including, without
limitation:
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(a)
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amendments
of a “housekeeping” nature; and
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(b)
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a
discontinuance of the Plan.
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(3)
Notwithstanding the provisions of Section 10(d)(2), the Company shall
additionally obtain any stockholder approval in respect of amendments to the
Plan that are contemplated pursuant to Section 10(d)(2) to the extent such
approval is required by any applicable laws or regulations.
(e)
Authorization of
Sub-Plans. The Board may from time to time establish one or
more sub-plans under the Plan for purposes of satisfying applicable blue sky,
securities or tax laws of various jurisdictions. The Board shall
establish such sub-plans by adopting supplements to this Plan containing (i)
such limitations on the Board’s discretion under the Plan as the Board deems
necessary or desirable or (ii) such additional terms and conditions not
otherwise inconsistent with the Plan as the Board shall deem necessary or
desirable. All supplements adopted by the Board shall be deemed to be
part of the Plan, but each supplement shall apply only to Participants within
the affected jurisdiction and the Company shall not be required to provide
copies of any supplement to Participants in any jurisdiction which is not the
subject of such supplement.
(f)
Compliance with Code
Section 409A. No Award shall provide for a deferral of
compensation that does not comply with Section 409A of the Code, unless the
Board, at the time of grant, specifically provides that the Award is not
intended to comply with Section 409A of the Code. The Company shall
have no liability to a Participant, or any other party, if an Award that is
intended to be exempt from, or compliant with, Section 409A, is not so exempt or
compliant or for any other action taken by the Board.
(g)
Governing
Law. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, excluding choice-of-law principles of the law of such state that would
require the application of the laws of a jurisdiction other than such
state.
[As
amended by the Board of Directors on March 4, 2008 and approved by the
Stockholders of the Company on [May 22, 2008].]
Appendix
B
CERTIFICATE
OF AMENDMENT
OF
AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
OF
WORLD
ENERGY SOLUTIONS, INC.
Pursuant
to Section 242 of the
General
Corporation Law of the State of Delaware
World Energy Solutions, Inc.
(hereinafter called the “Corporation”), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify as follows:
A resolution was duly adopted by the
Board of Directors of the Corporation pursuant to Section 242 of the General
Corporation Law of the State of Delaware setting forth an amendment to the
Amended and Restated Certificate of Incorporation of the Corporation and
declaring said amendment to be advisable. The stockholders of the
Corporation duly approved said proposed amendment in accordance with Section 242
of the General Corporation Law of the State of Delaware. The
resolution setting forth the amendment is as follows:
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RESOLVED:
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That
the first paragraph of Article FOURTH of the Amended and Restated
Certificate of Incorporation of the Corporation[, as amended,] be and
hereby is deleted in its entirety and the following two paragraphs are
inserted in lieu thereof:
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“FOURTH. That,
effective at 5:00 p.m., eastern time, on the filing date of this Certificate of
Amendment of Amended and Restated Certificate of Incorporation (the “Effective
Time”), a [one-for-two]
[one-for-three] [one-for-four] [one-for-five] [one-for-six] [one-for-seven]
[one-for-eight] [one-for-nine] [one-for-ten] reverse stock split of the
Corporation’s common stock shall become effective, pursuant to which each [two] [three] [four] [five] [six]
[seven] [eight] [nine] [ten] shares of common stock
outstanding and held of record by each stockholder of the Corporation
(including treasury shares) immediately prior to the Effective Time (“Old Common
Stock”) shall be reclassified and combined into one share of common stock
automatically and without any action by the holder thereof upon the Effective
Time and shall represent one share of common stock from and after the Effective
Time (“New Common Stock”).
Notwithstanding
the immediately preceding sentence, no fractional shares of New Common Stock
shall be issued to the holders of record of Old Common Stock in connection with
the foregoing reclassification of shares of Old Common Stock. In lieu
thereof, the aggregate of all fractional shares otherwise issuable to the
holders of record of Old Common Stock shall be issued to Computershare Trust
Company, Inc., as agent, for the accounts of all holders of record of Old Common
Stock otherwise entitled to have a fraction of a share issued to
them. The sale of all of the fractional interests will be effected by
that agent as soon as practicable after the Effective Time on the basis of
prevailing market prices of the New Common Stock at the time of
sale. After such sale and upon the surrender of the stockholders’
stock certificates, the transfer agent will pay to such holders of record their
pro rata share of the net proceeds derived from the sale of the fractional
interests. Each stock certificate that, immediately prior to the
Effective Time, represented shares of Old Common Stock shall, from and after the
Effective Time, automatically and without the necessity of presenting the same
for exchange, represent that number of whole shares of New Common Stock into
which the shares of Old Common Stock represented by such certificate shall have
been reclassified (as well as the right to receive cash in lieu of any
fractional shares of New Common Stock as set forth above), provided, however,
that each holder of record of a certificate that represented shares of Old
Common Stock shall receive, upon surrender of such certificate, a new
certificate representing the number of whole shares of New Common Stock into
which the shares of Old Common Stock represented by such certificate shall have
been reclassified, as well as any cash in lieu of fractional shares of New
Common Stock to which such holder may be entitled as set forth
above.
The total
number of shares of all classes of stock which the Corporation shall have
authority to issue is [80,000,000] [55,000,000]
[42,500,000] [35,000,000] [30,000,000] [26,428,571] [23,750,000] [21,666,667]
[20,000,000](1)
shares, consisting of (i) [75,000,000] [50,000,000]
[37,500,000] [30,000,000]
[25,000,000] [21,428,571]
[18,750,000] [16,666,667] [15,000,000] (1)
shares of Common Stock, $.0001 par value per share (“Common Stock”), and (ii)
5,000,000 shares of Preferred Stock, $.0001 par value per share (“Preferred
Stock”).
IN
WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed
hereto and this Certificate of Amendment to be signed by its President this
_____ day of _______, 200_.
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World
Energy Solutions, Inc.
By: __________________________
President
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_______________________________________________________
(1)Note: The number of shares of
common stock authorized will be proportionate to any one of the reverse stock
split ratios selected by the Board of Directors when effecting the reverse stock
split, if any. The number of shares of all classes of stock
authorized will be equal to the number of shares of common stock determined
according to the foregoing sentence plus 5,000,000 shares of preferred
stock.
